WDTV plays my MKV files fine from a hard disk connected to the media player. Playing (streaming) though a wired network is problematic, depending upon the complexity of the MKV file (it seems the higher the quality of the source video, the less likely to play without problems; e.g. jitter and/or bad sound). Bottom line: play via hard drive connected to WDTV.
Regular DVD ISO files work well no matter how I play them, but blu-ray ISO files don’t play at all, or if they do, they might not play by starting from the beginning, and there is no menu support, as blu-ray menus are a java app, and the WDTV does not do java I have been told.
The program I use to create MKV files from my blu-rays is PavTube’s ByteCopy. See this link about the attributes of ByteCopy from Anime_fan in this message thread: