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An MKV file is a container, not a format. Use YAMB do transfer the MPEG-4 video into an AVI container (no conversion, just transfer the container) so you can work with it. Use YAMB again to transfer the audio into it's own audio file (MP3, AC3, OGG, whatever). YAMB is free. It's sort of like demuxing an MPEG file. Then take that audio and AVI video and dump into your favorite MPEG encoder, like TMPGEnc.
Really easy.
You have to do the same thing with H.264 (AVC) and self-contained MP4 (MPEG-4) files these days. This is all next-gen video, an extended form of MPEG-2 and XVID sort of mushed together.
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