Thanks lance!

The first thing I tried was Perian. I have Perian 1.1.4 installed, however I can not open *.mkv with Quicktime. When choosing from the Open With... I can't select Quicktime. Or if do it the other way, open Quicktime and try to drag and drop or File> Open... the *.mkv in question, it doesn't let me!

I also attempted what you asked me with VLC and unfortunately it produced the same results in Console.

Outside of this issue, I don't think I am having any problems other than the mouse lag issue. For some reason I can't get that resolved :P

Thanks again everyone