Yes, Make MKV does a raw copy of one or more of the video and audio streams into the MKV container.
I'd say you could probably compress a main title with one or two audio tracks down to 5-6GB without significant quality loss (maybe even 4GB if the source is on the small side), providing that you are willing to wait for a few hours. Use the Constant Quality option with an RF value of 20-22 and without changing anything else you should get pretty solid video quality. The RF scale is logarithmic, so a small change can have a noticeable impact. As a general rule lower is better, but at some point you'll end up with a larger output than your input. I wouldn't go lower than 18 or higher than 24. If you plan to use mobile devices, you may need to encode using the H.264 Baseline profile (and you may need to go with a higher RF to keep the bitrate in check). Otherwise I'd probably stick to the High profile.
For audio you may want several tracks depending on how many devices you plan to play back on. If you have a home theatre system capable of decoding Dolby TrueHD and DTS-HD Master Audio then you'll probably want to keep those using passthrough unless they take up too much space. You'll want at least one other more widely compatible option if you use other devices.
If you have many devices, you may want to look at http

/www.mediabrowser3.com/ or https

/plex.tv/. With these you can just encode a single high quality source and let the media server encode on the fly to something that the client can play back (if this is required).
EDIT: I've created an example of the difference between an original frame and one from a video compressed using RF 20 with a couple of other video settings slightly tweaked, and a single FLAC stereo track (I would only use this on my PC with headphones... actually I would probably just pop the disk into my PS3

). Compressed file size is 4.2GB. Encode took about 3h 20m on an i7 920 without hyperthreading enabled.
Raw:
http
/i.imgur.com/dyHeN0R.png
Compressed:
http
/i.imgur.com/HyZqaIw.png
Of course single frame comparisons aren't everything.