Here's what the mkv file looks like playing normally in Media Player Classic:

Here's what it looks like after I extract the video using MKVextract.exe and/or VirtualDubMod and play it in Media Player Classic:

(note, its the same frame and everything, the entire video stream is messed up)
I honestly have no idea why its doing this. I've extracted other H264 video files from other MKV containers and this hasn't happened, tons of times. This is news to me and I don't even know where to start looking for help. the mkvtoolnix package is updated to the latest, as is Virtual Dub Mod.
Hope someone here has a few hints to get this working for me.

P.S: Something wierd though, the video plays fine if I play it in VirtualDubMod rather than Media Player Classic. Media Player Classic gets the mucked up mess you see up there though. Windows Media Player also doesn't play it right.