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HandBrake is compatible with most MKV files (it's based on ffmpeg so it can read a lot of different formats).
How long did you wait? It can take some time for the progress indicator to start. Also try a HandBrake nightly version. If it still doesn't work I would cut a short sample from the beginning using mkvtoolnix and if that doesn't process either send it to the developers (maybe test against ffmpeg).
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