This is because mencoder on your server upgraded to latest version, on latest mencoder, they changed command line options.

For new version of mencoder, you need to use convert command

Code:
$cmd_mencoder = "$config[mencoder] '$video_src' -o $video_flv\
-of lavf -oac mp3lame -lameopts abr:br=56\
-ovc lavc -lavcopts vcodec=flv:vbitrate=500:mbd=2:mv0:trell:v4mv:cbp:last_pred=3
-srate 22050 -ofps 24 -vf harddup";
http://docs.buyscripts.in/wiki/Mencoder_options