The reason I brought up the DTS surround track in SUBLER is initially my original question. I had an MKV file that kept going RED STOP SIGN in SUBLER and member Pyro suggested I download Perian to process it in SUBLER which it did! However after processing the file, it changed the single Audio file (DTS 5.1) into a 2 stereo audio track.
Guess this is where I got confused with the Perian thing, because I thought that if you paired it with SUBLER it would convert the MKV file W/DTS 5.1 track into an iTunes compatible file that retained its 5.1 audio?
To help break it down in one post:
You technically can have it convert the MKV to have true 5.1 Audio with Subler, but the problem is that it will be AAC 6-channel audio, which isn't supported by 99% of receivers (It will end up downmixed to an odd 3.0 audio according to dynaflash). The 2-channel audio you are getting is Dolby Pro Logic II which is technically stereo, but has algorithms to turn it into surround sound on compatible receivers.
What you want for true surround sound in an MP4 container (for Apple TVs) is AC3 audio. AC3 is Dolby Digital Surround (true 5.1) and is supported by pretty much every receiver on the planet. Unfortunately, Subler does not support downmixing to AC3 (it only supports AC3 pass thru if the file is already created), so you will need a different program to do this.
There are 2 very popular programs that can be used for this, each with pros and cons.
Handbrake: Probably the most popular re-encoding program on the planet, and definitely one of the best (if not the definitive best). The pros are the massive support behind the project, the open source nature, and the phenomenal devs behind the project. Handbrake has great presets for many Apple devices (Apple TVs, iPods, iOS devices) and they all work great as well. They also have excellent support and have tons of customizability functions for all h.264 funcitons.
The downsides to Handbrake are that you need to re-encode every file. This takes hours for each movie. There is no video pass-thru for "remuxing" so it will re-encode every frame, but this will often result in much smaller file sizes and a very small loss of quality (depending on the settings you choose).
MP4Tools: This is a very popular program for MP4 conversions. The benefit is that it supports Video Pass Thru and can "remux" like subler, meaning it takes less time and you get the best video quality. I should also note that this program can also be used to re-encode videos as well with H.264 encoding (like handbrake). This also supports making an AC3 5.1 audio channel as well as a 2-channel AAC audio channel for all Apple Products to support it.
The cons of MP4Tools is a general lack of customizability and the true amount of h.264 options. It also has nowhere near the amount of support that Handbrake has behind it. It also costs $5, but has a free version with a slightly annoying popup and some missing features (nothing major). I strongly recommend supporting our wonderful Devs however.
Either way, both programs will get you a compatible MP4 file and will get you both audio tracks (a 2-channel for stereo devices, and a true 5.1 channel for your surround sound). Whichever one you decide to use is up to you!
I hope this helps answer your questions and gets you where you want to go.