is it possible to update the firmware so mkv files can be played?
Your post sounds more like an Idea or a Feature Request. The best place for this is in our Ideas Lab. This way someone from WD will be sure to see it. However, I would search first and make sure that there isn't another idea similar to yours that you could add your post to and vote on.
Ideas Lab http://community.wdc.com/t5/community/categorypage/category-id/idea
The Ideas lab folder is a very good idea, but wait 6 months or more for a firmware update is not acceptable.
also, in come cases no more firmwares (WDTV 1st gen).
It should be nice to have, for each feedback, an aswer.