OK, I very much appreciate all the tutorials out there but I kept running into "problems" so I sort of came up with my own method to convert MKV to WMV-HD 5.1 360 Ready files. Here's the process I now use and that has worked "flawlessly" every time thus far...
VISTA/XP USERS W/ MICROSOFT EXPRESSION ENCODER:
(Note: For XP users, you can follow this tutorial, but install a different and comparable codec pack)
Setup:
1) Uninstall all codecs and then use the Codec Removal Tool 2.12 (I believe) to fix and remove broken codecs
2) Install the Vista Codec Package and leave all options/configuration at defaults (including ffdshow audio and ac3 filter settings)
3) Install Avisynth 2.5.7
4) Extract the standalone WMENicEnc
5) Install the MKVtoolnix and the MKVmerge GUI (if not included with MKVtoolnix)
6) Install Windows Media Encoder (includes the Windows Media Stream Editor and Profile Editor which we will use)
7) Install Microsoft Expression Encoder
After that is done, here's the process I use:
1) Open the MKV in MKVmerge and uncheck the audio track and all subtitle tracks. Set the height and width for video track to the actual height and width of the MKV movie. Then save MKV to a new file which now only contains a video track.
2) Create an AVS file for the original MKV (with audio) and open that file in WMENicEnc. Uncheck the video option and select Windows Audio Pro 10 with a setting like this: 384 (640)kbps 48kHz 5.1 24 bit CBR. This will depend on the sources audio quality. You should at this point reload the AVS file to make sure it saves out the audio as WMA (bug in WMENicEnc?) NOTE: if your audio track is a DTS file you will have to convert it to AC3 first using something like Tranzcode and BeLight (Besweet).
3) Open the Window Media Profile Editor and create a new profile, for example:
NO audio (uncheck), Video=CBR, aspect ratio=1280x720 (1280x544, etc.), frames/sec=23.976 (29.97), key frame interval=2, bitrate=10M (10000K), buffer time=5, video smoothness=100 (sharpest).
(Note: I would recommend creating a new profile for each aspect ratio and/or frames per second)
4) Open up the new MKV (which now has just a video track) in Expression Encoder using the Import button. (You should now be able to delete the original MKV file as you have converted the audio track to WMA)
5) Load the profile you created. Uncheck the 2 pass encoding if it's checked and then select the down arrow below the checkbox--set the video complexity to Fastest=0. Since the profile has no audio settings in it, just disregard the audio settings in Expression Encoder. For good measure, you can change the Resize Mode to Stretch, but this shouldn't matter as the Profile should match your video's aspect ratio. You can now check the output settings to select where you want the WMV output to save to. Then hit the Encode button in Expression Encoder.
6) Now use Windows Media Stream Editor to create a new file. Since Expression Encoder does not publish 5.1 audio, you will open the newly encoded WMV in the Stream Editor and then select the video track (you shouldn't have an audio track in the output file). Then open the 5.1 WMA you made with WMENicEnc. Select the audio track from the WMA file. Create the new file with the selected video and audio tracks.
You should now have a 720p (544p) Xbox 360 WMV-HD movie with 5.1 audio (IMG:
style_emoticons/default/smile.gif) I have tested many conversions using this process via network streaming, USB 2.0 hard drive, and DVD+R DL. All of them look fantastic and have synced audio.This method has produced nothing but compatible, smooth playback, 720p WMV-HD, 360-friendly files for me.
Note: For a 2.5 hour movie, it only took 3.5 hours to encode on my AMD 3800+ with only 1gb of ram! The key is selecting Fastest=0 for the complexity setting in Expression Encoder. The video smoothness=100 and 10M bitrate make up for whatever video quality is lost due to using the Fastest=0 settings. The goal was to encode an mkv to wmv-hd file as quickly as possible while still retaining great video quality and a file size that is still reasonable to work with.
If anyone is interested in trying this out and has further questions, plz don't hesitate to ask. I know this has been somewhat truncated and someone out there might not be able to track down all the needed software, etc. I can post file links if necessary. Hope this helps someone!