This is a tutorial on how to encode MKV files with subtitles into MP4 using Format Factory. You can download Format Factory for free here. I recommend getting version 1.90 instead of the newest version because the newest version removed the custom settings profile.
*Update 7/12/10* I now recommend version 2.40 since it now allows you to use custom settings and even lets you create your own custom profile. The tutorial no longer is consistent with the latest version. You will need to create a new custom profile instead or use FormatFactory’s pre-made settings. I may revise the tutorial sometime in the future.
Step 0 (optional): Change the output folder to where you want the mp4 file to be saved.
Step 1: Click on “All to MP4”
Step 2: Click on “Output Setting”
Step 3: Click on the Profile dropdown box and select “Custom” at the bottom or you can use one of many presets that are already included. It’s up to you. (Don’t see “Custom” on the list? You should get version 1.90 instead of the newer versions which does not have a custom profile setting.)
Step 4: Select your settings or use my settings which can be found here.
Step 5: Click on “Add File” and select the mkv file that you want to convert.
Step 6: Click “OK” to return to the main screen.
Step 7: Click on “Start” to begin encoding!
Mumbling Mithinco 
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Im not sure what you are doing is this just a straightforward conversion? What do the subtitles have to do with anything, do the settings remove them or what??
It’s pretty much a straightforward conversion. The main purpose of this tutorial is to get subtitles to be properly converted. There are a lot of people who watch anime or foreign movies who have difficulty converting video with subtitles properly.
Thank you for these instructions, really helpful!! I always use Acethinker Video Converter to convert video, free and works perfect. Share it here as an alternative to format factory.