Thanks for your response.
The issue with the WD TV I am having with vob files is not so much a/v sync, but unable to fast forward or reverse to a specific scene. I am able to fast forward & reverse, but when you get to the scene you wanted and select play it jumps to a totally different scene. This has more to do with the media server than the encoding. This issue does not happen with mkv files nor avi files which is why I was trying to use those files instead. However as it's being pointed out here the resolution of those files is not the same as a vob.
Solution you suggest of PCH A-110 is on my list to look at. My understanding is this device does not have this issue with vob files. I don't care about have a complete iso working, since all I want is the movie with any surround sound and forced subtitles. I rather save the space.
The PCH is my understanding is more of a streamer. I know you can put your own internal hard drive in it, but I am not sure if it can take any external drives via usb or firwire. I only watch my movies in one room, so streaming is not a big benifit for me. I also don't care for having a PC on in another room everytime I want to watch a movie.
Now if I can connect an external drive directly to a router and beam it to the PCH I might consider that.(By-pass having to have a PC on). I have not looked to see if I can do that.