OK. There are NOT such known bugs in this application. I'm pretty sure about it. It seems like your whole AV setup suffers here, based on the description you gave. Things are not that bad if you decide to rebuild your AV setup. If you agree too, let's take the following steps.
REQUIRED PROCESS
1. Uninstall mkvtoolnix and Halli Media Splitter. Open regedit (start - run -and type "regedit" in the tab) and delete any "mkvmergeGUI" and "Haali" remaining entries (use the "find" function of registry editor). If you're not familiar with regedit, then either don't do this and/or take a backup of your registry before messing up with it.
2. Reboot pc.
3. Uninstall any codec packs you may have installed and especially if it's CCCP.
4. Reboot.
5. Install ALL the apps mentioned below in the EXACT following order (install one by one and remember to reboot each and every time):
1. Haali Media Splitter, 2. CoreAvc Pro v1.5 or 1.6, 3. Sonic Cineplayer HD DVD decoder, 4. ffdshow ("rev1732_20071228_clsid_sse_icl10" tryout is proved to be rock solid. Disable all codecs except "raw video". This should be set in "all supported". In the "Output" field, check only "YV12" if your OS is XP SP2 or "NV12" for Vista. Leave grayed the "Set pixel aspect ratio in output media type" & "Allow output format changes during playback". Go to the "Decoder options" tab and make sure you check only "Autodetect", "Drop frame on delay" and "Skip H264" deblocking on delay". Don't touch the originally set values of these last two options) 5. WMP11 (if it's not already installed), 6. AC3Filter v1.46 (remember to configure it as by my tutorial found stickied below this one), 7. Xvid decoder v1.1.3, 8. MeGUI (before continuing, run it once and select yes when ask to update itself. Remember also to chose all available profiles to insert when you'll be asked for), 9. MainConcept Reference (the one of my post, not the portable edition), 10. PowerDVD v.3104 or 3319a, 11. Nero 7 Ultra (latest version), 12. Avisynth v2.57, 13. Download "Graphedit", copy paste the "Dump.ax" into you windows - "system 32" folder and have it registered and finally 14. DirectVodSub. You need it for watching subtitles (and not only for this).
You might be confused already as for the reason you need all the above to be installed even though you probably don't plan to use them. The answer is very simple. All the above mentioned programs are contributing their DirectShow decoders, filters and splitters so you be able to playback or transcode almost any type of widely used AV formats.
6. Install mkvtoolnix (LATEST version).
7. Reboot
8. Download "MKVextractGUI v.1.6.4.1" (installation is not required) and run it to demultiplex your original mkv file.
9. Use MKVmerge to multiplex the AV streams of your preference into a new mkv container.
SOME DOWNLOAD LINKS & HINTS
1. Link for MCR. It's the latest version posted by another forum member. Tested and working 100% too so far. Just run the installer. It's already patched.

2. FFDSHOW. Go below and download ffdshow from the first link provided.

3. Xvid 1.1.3 link

4. CoreAvc. Listen, what most ppl don't know is that from the moment you're using FFDSHOW in you playing graph, no DXVA is possible. The setup I proposed is NOT for weak pc configurations. The only difference between these two versions of CoreAvc is that v1.6 consumes a bit more of CPU resources comparing to v1.5. To my personal opinion, differences are τοο negligible to talk about them. So, it's only up to you and your pc capabilities to decide which version you want to install. Personally I'm running on v1.6 (remember to select "blend" in the Deinterlacing tab). Here follows the link to 1.6.5 version (latest).

Finally,please allow me to give you some further hints.
A. Assign AC3 decoding to Sonic's Cineplayer decoder and DTS / WMA to AC3Filter. For configuring this decoder, go to Windows Control Panel and you'll find it listed there.
B. It's always better to use SPDIF.
C. Zoom Player WMV Pro v5.5b1 is by FAR the best player out there no matter what others have to say about this. If you're familiar with AV stuff and DS config then this is the absolute player to go with. Zoom's GUI is also a breeze to look at and work with. Here follows the link in case you like to give it a try.

D. Assign generic mpeg2 decoding to Cyberlink's (if you have PowerDVD installed) relevant decoder ("CyberLink Video/SP Decoder") and you can use Nvidia's PureVideo decoder ("NVIDIA NVDVD v3+") for low bitrate mpg playback (DVD). You can do some googling and I'm sure you'll find a working download. There are tons out there. The version you should seek for is 1.02-233.
E. You can always add ffdshow to all video formats playing graphs, like H264, MPEG2, MPEG4, AVI etc (except VC-1 advanced profile if decoding is on Microsoft's decoder. A/V sync issues occur in this case) and use its filters to enhance picture quality (i.e. resize, postprocessing, sharpen, denoise, picture properties etc.). You'll be amazed by the outcome if you know what you're doing!
F. DirectVodSub. You can download it below.

Good luck
REQUIRED PROCESS
1. Uninstall mkvtoolnix and Halli Media Splitter. Open regedit (start - run -and type "regedit" in the tab) and delete any "mkvmergeGUI" and "Haali" remaining entries (use the "find" function of registry editor). If you're not familiar with regedit, then either don't do this and/or take a backup of your registry before messing up with it.
2. Reboot pc.
3. Uninstall any codec packs you may have installed and especially if it's CCCP.
4. Reboot.
5. Install ALL the apps mentioned below in the EXACT following order (install one by one and remember to reboot each and every time):
1. Haali Media Splitter, 2. CoreAvc Pro v1.5 or 1.6, 3. Sonic Cineplayer HD DVD decoder, 4. ffdshow ("rev1732_20071228_clsid_sse_icl10" tryout is proved to be rock solid. Disable all codecs except "raw video". This should be set in "all supported". In the "Output" field, check only "YV12" if your OS is XP SP2 or "NV12" for Vista. Leave grayed the "Set pixel aspect ratio in output media type" & "Allow output format changes during playback". Go to the "Decoder options" tab and make sure you check only "Autodetect", "Drop frame on delay" and "Skip H264" deblocking on delay". Don't touch the originally set values of these last two options) 5. WMP11 (if it's not already installed), 6. AC3Filter v1.46 (remember to configure it as by my tutorial found stickied below this one), 7. Xvid decoder v1.1.3, 8. MeGUI (before continuing, run it once and select yes when ask to update itself. Remember also to chose all available profiles to insert when you'll be asked for), 9. MainConcept Reference (the one of my post, not the portable edition), 10. PowerDVD v.3104 or 3319a, 11. Nero 7 Ultra (latest version), 12. Avisynth v2.57, 13. Download "Graphedit", copy paste the "Dump.ax" into you windows - "system 32" folder and have it registered and finally 14. DirectVodSub. You need it for watching subtitles (and not only for this).
You might be confused already as for the reason you need all the above to be installed even though you probably don't plan to use them. The answer is very simple. All the above mentioned programs are contributing their DirectShow decoders, filters and splitters so you be able to playback or transcode almost any type of widely used AV formats.
6. Install mkvtoolnix (LATEST version).
7. Reboot
8. Download "MKVextractGUI v.1.6.4.1" (installation is not required) and run it to demultiplex your original mkv file.
9. Use MKVmerge to multiplex the AV streams of your preference into a new mkv container.
SOME DOWNLOAD LINKS & HINTS
1. Link for MCR. It's the latest version posted by another forum member. Tested and working 100% too so far. Just run the installer. It's already patched.

2. FFDSHOW. Go below and download ffdshow from the first link provided.

3. Xvid 1.1.3 link

4. CoreAvc. Listen, what most ppl don't know is that from the moment you're using FFDSHOW in you playing graph, no DXVA is possible. The setup I proposed is NOT for weak pc configurations. The only difference between these two versions of CoreAvc is that v1.6 consumes a bit more of CPU resources comparing to v1.5. To my personal opinion, differences are τοο negligible to talk about them. So, it's only up to you and your pc capabilities to decide which version you want to install. Personally I'm running on v1.6 (remember to select "blend" in the Deinterlacing tab). Here follows the link to 1.6.5 version (latest).

Finally,please allow me to give you some further hints.
A. Assign AC3 decoding to Sonic's Cineplayer decoder and DTS / WMA to AC3Filter. For configuring this decoder, go to Windows Control Panel and you'll find it listed there.
B. It's always better to use SPDIF.
C. Zoom Player WMV Pro v5.5b1 is by FAR the best player out there no matter what others have to say about this. If you're familiar with AV stuff and DS config then this is the absolute player to go with. Zoom's GUI is also a breeze to look at and work with. Here follows the link in case you like to give it a try.

D. Assign generic mpeg2 decoding to Cyberlink's (if you have PowerDVD installed) relevant decoder ("CyberLink Video/SP Decoder") and you can use Nvidia's PureVideo decoder ("NVIDIA NVDVD v3+") for low bitrate mpg playback (DVD). You can do some googling and I'm sure you'll find a working download. There are tons out there. The version you should seek for is 1.02-233.
E. You can always add ffdshow to all video formats playing graphs, like H264, MPEG2, MPEG4, AVI etc (except VC-1 advanced profile if decoding is on Microsoft's decoder. A/V sync issues occur in this case) and use its filters to enhance picture quality (i.e. resize, postprocessing, sharpen, denoise, picture properties etc.). You'll be amazed by the outcome if you know what you're doing!
F. DirectVodSub. You can download it below.

Good luck
Just to let everyone that I followed this installation guide step by step (well I did not reboot after every install... maybe after every third installation, do not tell tpAVm ) and now I can play all my files with out any hitches or problems. I used to have problems playing back .mkv cartoon movies but now that is gone.
If you guys are having trouble playing back files or encoding read tpAVm posts.
A BIG thanks to tpAVm for taking his time to write down and post his finding and discoveries.

Time to stop talking








