Hi ircphoenix. If you can get PS3 Media Server to work, you should not need to use MKV2VOB. I was able to successfully stream Harmy's Despecialized 2.0 to my PS3 using PS3 Media Server 1.7. The audio and video both worked.

This may sound like a stupid question, but does the Despecialized audio work okay on your computer? (The reason I ask is, when I first downloaded 2.0, I had a bad copy.) Also, you mention that "the other PS3 audio works"—do you mean that you hear audio from other videos using PS3 Media Server, or are you talking about game audio, etc.? If you meant game audio, you might want to try playing another video just to see if it works.

If it still won't play, I agree with Schmendrick, remuxing the video into a PS3 friendly AVCHD, .mp4, .vob, or a .ts video is your best bet. As he/she said, unless subtitles are important, I would only re-encode the video as a last resort. It's time consuming and you'll lose quality.

Hope this helps!