VLC does not reproduce MPEG2 video streams in Matroska properly.
Files generated by mkvmerge using a MPEG2 video elementary as source are not reproduced properly by VLC while the original video stream is reproduced properly.
This has been tested with VLC 1.0.5 under Windows and VLC 1.0.2 under Ubuntu 9.10.
The original ticket in mkvmerge bugzilla. The file needed to reproduce the bug is available upon request (20 MB).