I managed to run videos with sound using FFMpeg and VLC codecs (Mencoder is still disabled, sound doesn't work when it's activated and is the default encoder).
Now I've run into another problem: FFMpeg won't display embedded subs in mkvs (I think it just can't right now in PMS, so I guess it's ok). I have working embedded subs in mkvs using VLC as the encoder, but for some reason, on select mkvs, the subs won't show (I think it's because they aren't labelled as Eng, Fre, etc. But although I have "und" as a category, they still won't show up...)
Another problem is that I have no sound (not even noise) in mp4 files when using VLC as the encoder (but the sound is fine if FFMpeg is the encoder). Not a huge problem, unless I have a mp4 with subs, which is very unlikely.
Any help is appreciated. Since the problem is kinda different now (i.e. subs not showing in select mkvs using VLC), I may have to start a new thread... I'll see what responses I get on that one first.