As I found out PS3 wont play HD .Mkv files, but I found a program called mkv2vob (http://www.3r1c.eu/mkv2vob/mkv2vob.exe) which does as the name suggests. It turns the mkv file into a vob/mpg file which brings you a step closer to streaming it to your ps3.
Also it dosent take long for the program to do this, so far I have been experimenting with smaller files, the biggest has been 28MB and this has completed in under a minute.
So here is what I do:
1. Open mkv2vob, select your mkv file and load it up. As for the settings in the program i have just left them as default.
2. Select your Destination folder then hit add file, and let it do its stuff.
3. Once mkv2vob has finished, find the outputed file in your desination directory and rename it with a .mpg on the end.
4. Thats it. Assuming you have your media center set up, if not there are guides on this forum on how to do that, just put the file in your media folder, then look on your PS3 and it should be there in your video folder for you to play in HD.
If it plays on your PS3 with glitching as mine did first time around it is more than likely that you are trying to stream via wifi and your router cant handle HD content being streamed. I just changed my PS3 media network to a wired connection instead of using wireless, as I know my router cant handle streaming HD and it worked perfectly!