There are two barriers to using PAL in an NTSC dvd-player.
First is the region coding, which the movie-and-dvd industry instituted to protect their profits. PAL dvd's are in different regions than NTSC.
Second is framebuffer size. PAL video is higher resolution and has a higher framebuffer. It is possible to use a product called "dvd region x" to play NTSC dvd's in a PAL machine, but the reverse doesn't work, because it's trying to fit something bigger into something smaller. NTSC equipment can't handle video with the higher framebuffer size of PAL.
Because of the second reason, it is not possible to make a region-free copy, and then play in in the ps3, because it still can't be processed by the hardware.
In theory I think it may be possible to make a region 0 copy and play it on an HDTV, but I have read stuff by people who tried this and failed. Maybe it is the hardware itself that can't read PAL, even before it's upconverted to HD by the ps3.
In any case, if you can copy dvd's, you can certainly transcode them. There are many freeware programs that will convert dvd files from PAL to NTSC, so you can burn them later (they will need to be shrunk down if they're 9gb, though). For linux, gtranscode, k9copy, PiTiVi Video Editor, Gopchop, gtranscode, and DeVeDe can get it done. For windows there are tons of stuff as well, free stuff, no need to mess with shareware. Either make a
a region 0 copy transcoded to NTSC, or transcode it to an .mp4 file or other ps3-compatible format.
As for .mkv, that is an open-source format so there is no proprietary codec. The ps3 doesn't support it, but since it is open-source, it is easy enough to use the programs I mentioned above to transcode it into an .avi or .mp4 file.
One other thing: don't bother trying to watch PAL dvd's in OtherOS. It still won't work because of the framebuffer difference, and even if it did, video in OtherOS is severly limited because the graphics chip is locked by the hypervisor. Meaning the video is choppy, low framerate, and doesn't look good.