VLC cannot play MKV files at all.
The software just freezes up and fails to play anything.
This is a fault with an older version of VLC Media Player.
Please upgrade to the latest version. It is an issue with the video encoding. Just re-download the software, and re-install and all should be fine.
VLC hangs when opening MKV file
This problem might occur when using VLC to view an mkv file in a directory that has a large number of .mkv files. (e.g. in an Azureus download directory).
VLC will attempt to preload all the .mkv files in the directory and therefore will hang, especially if some .mkv files are not fully downloaded yet (thus seem to be broken).
The solution is to set the mkv option:
--mkv-preload-local-dir to false:
Preferences → Input / Codecs → Demuxers → Matroska → Preload Directory (uncheck the checkbox).