You don't need to convert anything. Open VEGAS, go to Options>Preferences>File I/O and check the option for MKV. Save your setting and you are good to go!

Fear not, as FFmpeg is here to save the day.

Step 1
Install FFmpeg. This involves extracting the files from the archive, and setting the directory as a Windows environment variable. You may need to find a FFmpeg installation tutorial if my previous sentence sounds like morse code to you, sorry! (I lost my text when I accidentally closed the writing page on Steam so :/)

Step 2
Run the following in command prompt:

explanation:

• YOUR_VIDEO_HERE.avi
  is the file name of your video. Don't forget to change the extension, if applicable
  
• -vcodec libx264
  will transform your video into h264
  
• -acodec aac
  will transform the audio track to aac
  
• -strict experimental
  gonna be honest, I don't know what this does
  
• -pix_fmt yuv420p
  transforms the pixel format to yuv420p
  
• -b:a 192k
  the audio bandwidth is set to 192kbps
  
• -ar 48000
  the sample rate of the audio is now 48kHz
  
• output.mp4
  this will be the output file, you may change the name but keep it mp4

You could play around with the audio bitrate and sample rate if needed, but I think the important part is to know that you will need a h264 video track with a yuv420p pixel format, along with a aac audio track, inside in a mp4 container.

And that's it! I hope this works out for you! I'd like to give a special thanks to the random user on a random website who shared this FFmpeg command. I had this saved in a text document on my computer for a very long time and it has been immensly useful to me. I can't find the original source anymore, so I thought I may as well share with the world!

Thanks for reading!