@ircphoenix, I used to stream to my PS3 all the time before I built an XBMC setup.

PS3 Media Server to stream content is definitely easiest way to go. But an MKV will always have to be transcoded on-the-fly because it's not a format recognized by the PS3. Transcoding forces your server machine to do a lot of extra work and if that machine is underpowered it can result in dropouts, etc.

The tool that became indispensable for me was MKV2VOB:

http://www.mkv2vob.com/showthread.php?tid=1

This little program will REMUX the MKV into and VOB or MPG container without re-encoding the video and sacrificing quality. As a result, PS3 Media Server can stream the new VOB file to the PS3 without the need for transcoding and the processing overhead it requires.

Also note that MKV2VOB will force you to pick one audio track for your remuxed file, AND if you choose to add subtitles the software will have to re-encode the entire file with hard subs (again PS3 limitation) resulting in a generational loss.

Ideally, remuxing an MKV without re-encoding takes virtually no time at all.

I hope this helps. Enjoy Harmy's excellent work!