XenonMKV (formerly MKVOfDeath) is a Windows frontend utility, similar to GOTsent and Videora Xbox Converter. It repackages high-definition H.264/x264 video and 5.1 audio contained in MKV files to an MP4 format that the Xbox 360 can play.
The utility has several significant advantages:
No video transcoding required. All video is maintained at its original quality.
Only the audio is downsampled, so the process is much quicker than a full transcode. The Xbox 360 only supports 2-channel AAC audio with H.264 source. This is a restriction of the Xbox 360 media player and isn’t because I hate 5.1 surround (I’d actually love it, but no dice!) Please write to Microsoft and request enhanced audio support (5.1 AC3, DTS and AAC) as a feature for future dashboard releases.
XenonMKV is designed specifically for the Xbox 360 video specifications. There’s no worrying about whether you’ve got the right converter settings.