You are correct that Mencoder won't auto detect SSE or SSE2 in Windows. There are quite a few discussions going on with the developers right now on the benefits of SSE verses MMX. However, the big benefit is with X264 encoding. You will notice that with my version of Mencoder version 12 the X264 library is an external dll. I did this so SSE and SSE2 could be auto detected in the dll and used with the X264 library. If you look at the whole mencoder output you should see this:
CPUflags: Type: 6 MMX: 1 MMX2: 1 3DNow: 0 3DNow2: 0 SSE: 0 SSE2: 0
Compiled with runtime CPU detection.
The above two lines are the CPUflags for mencoder itself. However, the line below is for the the X264 dll.
x264 [info]: using cpu capabilities: MMX MMXEXT SSE SSE2
Hope this helps clarify what is happening.