On the subject of whether the 3DS can play MKV: container format is not a limiting factor. MKV is just a package that holds whatever kind of video people put in it, so it's easy for someone to make a piece of software that's able to parse the MKV container, but that's not a meaningful way of talking about performance. Chances are, the 3DS won't be playing standard, meant-for-computers video, it's likely to be more like the DS, where users had to re-encode to a low-framerate, low-res format specifically for DS play. What that format is will depend on what the 3DS can keep up with. But in answer to the simple question "Could 3DS play video?" the answer is an unqualified "Yes." Hell, even commercial games do it.
Pure-speculation-I-don't-claim-to-know-anything-at-all-take-with-large-grain-of-salt: for 2D, widescreen (16:9) video, the 3DS would probably want something like 400*224 (letterboxed) and for 4:3, 320*240 (pillarboxed) with a framerate somewhere between 20 and 30 FPS. For 3D video, halve the framerates. This should be doable on 3DS and 2D video would be plenty satisfying (most films are 24FPS, TV shows are generally 24 or 30 NTSC, 25 PAL) for people who want to watch videos on the 3DS, although video in 3D would probably suck over long viewing periods. On embedded hardware like the 3DS, compression is less important, so H.264 (I guess this is probably what people mean when they talk about MKV since it's become the modern standard) is probably a bad choice. Less compression means easier to decode, which is the important factor for 3DS, so something MPEG-based is probably more likely.