Did you download the 720p version? That's the highest the TF101 can display anyway, the file size is smaller and will make later conversion faster.
Don't know how these movies download but many video players have problems with MKV movies. Your tablet is perfectly fine playing mp4 movies, it may be the file container that's the problem.
You could try to install DicePlayer, all necessary codeces and I believe they also offer a Tegra 2 plugin from Play but my recommendation would be to convert the movies on your PC to a Transformer friendly format.
AnyVideo Converter is great for that.
Install it on your PC then under the "Convert to" drop down choose the Android symbol, and look under "Android Tablets" for "Asus Eee Pad Transformer MP4 movie".
That should do it and keep that little rascal happy..