This question applies to all "film" type video

the resolution of dvd is 720x480

I've read the XviD FAQ and it said that cropping off black edges is a must coz you can save bits to encode the needed part

to completely crop the black edges, I cropped top=60 bottom=62

that is 480-60-62 = 358
358 is not divisible by 16

so i reduced the crop
i use top=55 bottom=57
now i get a 720x368, which is divisible by 16

but now there are 5 pixel black area on both top and bottom

after that, i encode to Xvid, the borders of the film iswavy, not a straight line when there is "water" scene, the edges "flow" like water too!

is 16x16 a must?

You should crop some of the picture to get mod 16 resolution instead of leaving black bars.

No, but this is a plus.
However no black borders is a must.

No, but this is a plus.

that means I can encode it to 720x358

But the XviD FAQ stated "make sure it is mod 16"

mod 16 is good
no black borders at all is even better
some lines of actual image cropped to obtain mod 16 without black bars is best