Encoding to h264 in .mkv container

[merch!]

I have an HD PPV concert that I recorded on my DVR and I want to make a high def copy of it, since I highly doubt it will ever see commercial release. I dumped it to my PC, but I don't have a BD burner or the know-how to author a BD. I figured a better option than the DL DVD I've already encoded would be to encode to AVC (is that h264? I'm not completely familiar with these terms) and burning to a DL DVD as data that I can view on my PS3.

I have looked through numerous walkthroughs on how to do this, and most seem to use Avisynth and a few other apps, but I have no experience with these. Can anyone show me a good Avisynth script to encode a 1080i MPEG transport stream to a 720p AVC file? In addition to the script, a good walkthrough would be appreciated.

Also, in the above format, a 260 minute concert should be able to fit on an 8.5 GB DVD with pretty good quality, right?

Thanks for any help.