I'll try that.
Right now, though, I tried it in XP. This time the files were not deleted automatically. But, instead of an .mp4, I was left with seperate .h264 and .wav files.
The process is extremely fast. It took about 10 minutes total (I'm comparing this to the 2+ hours it takes to convert an .mkv to .wmv with WMEncoder... which I've been doing now for several months with fantastic results). Once this program matures, it looks to be a fantastic alternative to get .mkv on the 360/PS3.