Ok here is a simple method that doesnt take but 10 to 25 mins depending....
I have been reading and reading for almost a year trying to find a better faster way to get .mkv's to play on the 360 than using Encode 360 that takes up to 30 hours sometimes.
No more compromises or hours of re-encoding. Just a simple container change and possibly a audio stream re-encode which only takes about 15 mins.
THis way retains the full picture quality and 5.1 surround sound.
This is done using Windows 7 so Transcode 360 and all those other older programs do not work on Windows 7 so other ways were needed.
Ok first get HDTVpump @ http://www.dvbportal.de/projects/hdtvpump/
HDTVpump makes it possible to play .ts on windows media center.
Then get tsMuxeR @ http://www.smlabs.net/tsmuxer_en.html
Basically tsMuxeR repacks the .mkv to .ts
Now one thing I found was that I was not getting any sound. I had perfect picture but no sound so i googled a lot and found that it might be b/c the the audio was dts and not ac3. So I got this other program to re-encode the dts audio stream to an ac3 stream.
Eac3to GUI. You will have to google it since there are many places to get it and I have not found the official site.
Now open tsMuxeR and Demux the audio stream ONLY if its DTS. If its AC3 already your good to go just mux in .TS and your good to go.
Only takes about 5-10 mins depending on the size of the movie.
Now if it was DTS AND you Demuxed it open up Eac3to click ad source. Select your Demuxed .dts file.
Now select the Audio tab. Its the next one over.
The top right of the window there is a drop down menu select your source.
The window will minimize and a command prompt will pop up for a second or two then the window will come back up.
Now top left of window type in Track 2 in File Name then save as type select ac3.
At the bottom click Lock current settings to Command line
Then click Run Command line
It will take up to 15 mins depending on the size of the file and if it needs a second pass.
Once that is completed close Eac3to and open tsMuxeR again. Add your movie AND Add Track 2.ac3
UNCHECK the .dts audio stream and click remove.
Now select Mux.
Once its done start up your 360 and media center and watch your movie.
I have only tryed watching .ts movies in Media Center on the 360!!!
THis works I have done this at least 5 times now and they all play just fine. Just take a couple more seconds to buffer.