Yopaz said:
My blu-ray player does the same thing, but with a wider support of codecs. Seriously, I can play mkv files from an external drive if I want.
The PS3 supports the video and audio codecs of an MKV but just not the container itself. You can remux the video and audio stream of a MKV into a MP4 (no converting whatsoever, just pure copying and it only takes a couple minutes to do) and the PS3 will play it just fine, I do it all the time, the only issue is with foreign language stuff as MP4 doesn't support subtitle tracks. AVI, MKV, MP4, etc. are containers, not codecs.