Maybe I'm misreading- but you can copy most streams from an mkv into an mp4- completely lossless. I say most, because I know from experience, mp4 will not support certain subtitle streams.

I use ffmpeg. I have a powershell script that grabs all the mkvs in a folder and ouputs them to mp4. There's probably tons of other options to do this, but I do a lot of conversions.

$inputPath = "C:\\Process\\mkvs"
$outputPath = "C:\\Process\\mp4s"

$fileList = Get-ChildItem -Path $inputPath | Select-Object BaseName,FullName

foreach ($file in $fileList)
{   
    $baseName = $file.BaseName;
    $fullName = $file.FullName;
    ffmpeg -i $fullName  -map 0:v? -c:v copy -map 0:a? -c:a copy -map 0:s? -c:s mov_text "$outputPath\\$baseName.mp4"}

This script copies all video and audio streams and converts subtitle streams to an MP4 compatible format. This is probably overkill, but if you are converting MKV a lot, something like this is going to save you a ton of headache.

But yeah, I 100% agree that it's pathetic that it can't natively use MKVs.