Burn software for .mkv files

Good day, running XP Home SP2,
I use Nero 7 Ultra for almost all DVD burning. But I've recently come across a .mkv file, which I understand is a newer video format with certain advantages. Unfortunately, Nero 7 does not recognize the format, nor does WMP 11. Two questions:
1) I amnot able to discover whether Nero 8, for which I have an offer, handles .mkv files, and
2) if not Nero 8, then what. I did find a .avi converter that will convert .mkv to .avi, but the trial version leaves a watermark in the center of the screen. Is there freeware available that will convert to .avi or burn .mkv files?

 

I have not tried this, but it is a majorgeeks download
http://www.majorgeeks.com/FAVC_d5741.html