Excellent hardware MKV player "BUZZ Player" also drops essential AC-3 support [UPDATE: broad compatibility report]
By Werner Ruotsalainen
The player I recommend (review; another, MKV-specific one), along with the (currently, not AppStore-based) AVPlayer(HD), the most for non-DTS (that is, mostly, AC-3) MKV's on non-jailbroken devices has been BUZZ Player - it has had one of the best MKV behind-the-curtains demuxing and hardware playback.