What would be the best way to watch MKVs in this format? So far I've seen that the SmartTV can't play h264 10-bit and can't play FLAC 5.1. Is there anyway to watch these files on the screen somehow? Right now I'm connecting an external to the TV through USB 3.0
An external media playback box that has the correct codec would work. Check the WD TV Media Live to see if it can play them. Check others.
If you can't find a box that can you could use a PC or convert them to a compatible file type for the TV.