Converting Files for my DSM-520

[Raistlfiren]

I just bought a D-Link DSM-520 to stream most of my movies, pictures, and music. The only problem is that it doesn't support .mkv files and does not like high bitrates from 1080P files... I know there is about a million programs to convert mkv to avi, and a crapload of info on the web, but is there a good way to go about doing this? My second question is there also a good way to convert 1080P to a low enough bitrate/quality to just pass by so I can play it on my DSM-520 ? I have played 1080I videos through the machine and has worked great...

Thanks for any help,
Rat