you cannot just burn mkv files directly to dvd, hindi masasama ang subtitle niyan. and if it has dual audio, mag conflict din ang audio file na masasama
you will have to extract the subtitle file first using virtualdub (with subtitler plugin so you can save the subtitle in ssa). then if you need to edit some aspects of the subtitle file you extracted (ssa), you will need something like subtitle workshop (i.e. converting it to the more common srt type).
anyway, after you have extracted the subtitle file, you may now convert the mkv file into avi (there are lots of methods you can use). the only problem is if the mkv has dual audio, in which case you need to use a software that will let you choose which audio stream to use (otherwise magpatong yung dalawang audio pag convert mo).
so now you have an avi file and a subtitle file (srt). you can now use convertxtodvd to convert it to dvd video
as for quality, ang importante would be the number of minutes you will be putting in the DVD. for a dual layer and using covertxtodvd i think a safe number (for minimum loss of quality) would be around 450 minutes to 600 (merong iba na pinagkakasya ang 900minutes sa isang regular DVD5 and the quality is really very bad).
