PS3 doesn’t support MKV and even if it did, there’s so many different video and audio formats that are used in MKV that it’s unlikely it’d be able to play them all. MKV is just a container, to play whats inside you still need the correct codec. It’s unlikely that the PS3 will be compatible with it until DivX 7 is released, which will use the MKV container and at least partially standardize the video format inside.
Your USB drive didn’t work because the PS3 doesn’t support NTFS. Which is retarded. Even the Wii media players can read NTFS partitions…
If you want to play video files, build a home theater PC. They typically run around $300 and use 1/3 the power of a PS3 when watching HD video. Mine uses around 45-50 watts when watching 1080p movies or playing MW2 on high, compared to the PS3 and XBOX which use 185 and 145 respectively during HD video playback.