Optimal File Size for .mkv Encoding with x264

I have been doing some experimentation with encoding using HandBrake and the mkv container and was curious for some information from those who have done this before. All I have used in the past was AutoGK and converted to .avi at around 1400mb as that was where I felt that I had the best quality to size ratio. I ran my first video thru Handbrake using the default settings to an outcome of around 580mb. Watching this back on the PC it looks good, but I haven't had a chance to view it on anything larger yet to really get a good handle on it. In looking around, I have found quiet a few video files encoded with mkv to 300mb, but I haven't viewed the quality. Is this the normal? What settings are you guys using. Or is there something better out there to be had. Any input would be very appreciated.

I've watched a couple of the 300mb and you think the quality is good, but, there tends to be frame dropping, not often, but enough to notice.

I haven't converted into the mkv container as I can't stand the things, although loads of poeple do. I would much prefer if the converted file was left in it's native format so more programs could work with it.

If you want an excellent mkv converter grab a copy of The Film Machine

I do have The Film Machine, but I am talking of converting my DVD Files to mkv not the other way around. Thanks though.

the only problem i have is that i can tell its not at the right framerate