There are a couple suggestions here:
http://forum.calgarypuck.com/showthr...93#post3253193
and here:
http://forum.calgarypuck.com/showthr...35#post3253635
Since you haven't mentioned what OS you're using it's hard to get into much more detail.
Re-encoding video is a CPU-intensive process - sometimes it's gonna take awhile. You shouldn't have to re-encode the video for most HD videos in MKV containers since it (usually) uses encoding that ATV2 understands as is, and you only have to put it in an M4V package to play it. It's common that you'll have to re-encode DTS or AC3 audio as AAC though.