One way is to forget doing technical stuff and just use Visualhub.
There are several threads on this in the AppleTV section and most come to the conclusion that converting with Visualhub is the easiest and will take a minor hit if any on picture quality.
There some minor problems with Visualhub, but they might have already been resolved? Specifically 5.1 aac soundtracks. The majority >95% of mkv's on the net will work fine on Visualhub.