There will alway be some kind of degradation if encoding is involved, especially if transcoding from one highly compressed lossy format to another. What you need to do is demux the video and audio components out of the mkv container, and then remux them into an MP4 container.
If the profile is compliant, it should work... though you may run into sync problems.
You could demux the MKV with MKVExtractGUI
which will kick out your video and audio streams into separate files. Then you can try to remux the audio and video streams into an MP4 container using a tool like MeGUI.
There's a guy in the Netherlands that is working on a h.264 MKV to PS3 MP4 converter that is supposed to leave the audio and video untouched. YMMV, details here:http://sites.google.com/site/sentry232/home
Another alternative is to make your MP4's from the original source material (BD disc). Unless you downloaded your movies, and if that's the case: shame on you.