I think you have to demux video,audio,subtitle.
You can probably use some kind of software that encodes the video and audio to an mpg fil dvd complicant, but theese all in one softwares usually dont give that good quality on the video, and they only do one pass encoding if you use 2 pass encoding the video will look better that one pass but will take double the time.
maby usefull links:
http://www.videohelp.com/ (they have TONS of information & guides with screenshots)
ogmdemuxer http://cyrius.bunkus.org/ogmtools.html
http://www.bunkus.org/videotools/mkvtoolnix/
http://www.bunkus.org/videotools/mkvtoolnix/doc/mkvextract.html
tmpg Encoder http://www.tmpgenc.net/en/e_download.html
http://www.mediachance.com/dvdlab/dvdlabpro.html (free trial in 30 days)
http://virtualdubmod.sourceforge.net/
First extract everything.
then convert the audio & video in some encodersoftware for example tmpgencoder.
If tmpgencoder cant read the fileformats mostly the sound try loading your video in virtualdubmod and file-start frameserv open this file in tmpgencoder while virtualdubmod still is active you might have to run AuxSetup.exe before you start virtualdubmod and in AuxSetup.exe install handler.
You might only have to encode the video if your mkv have already ac3 sound on it and then use the origionall soundfile
in tmpgencoder choose to output to eleminary streams instead of an .mpg then you dont have to demux the file again in dvdlab
After you have an mpg
or m2v & mpa/ac3
you can add the files to an dvd authorprogram for making meny.
i use DVD-Lab because it have the ability to add subtitle from srt.
If you want more fancy than backround image and subtitle on/off button
you might want to do some animated menys i think you can do this in Vegas videoediting software.