The best tool I have found for converting your high-definition mkv files with x264 video and AC3 sound, to a PS3 friendly format is mkv2vob.
Previously I’d have had to transcode or convert the mkv file to an avi or other PS3 compatible video format, which would take ages and I’d lose the AC3 sound.
Mkv2vob simply muxes the x264/AC3 streams in the mkv file to a vob file, which is readable by the PS3. There is no transcoding or re-compression involved so there is no loss in quality. If the mkv includes DTS sound, then there is an option to transcode that to AC3, but my system can handle DTS so I leave it as it is.
The whole process takes literally minutes. Occasionally I have a file which does need to be transcoded and this does take longer than the regular process, but it happens so rarely that it’s not an issue for me. The good thing is that the user does not have to do anything, the program detects the type of the video source and automatically determines if any conversion is required.
Once the process has completed, an mpeg file is produced which can be played on your PS3, complete with HD video and surround sound – awesomes!