Fishcake21, have you tried Plex? Extremely unmac-like interface but it's my first port of call when there are problems with 0.9.* VLC and it handles 1080p x264 MKV files very well.
I installed 0.9.2 on our 2.1GHz G5 iMac and playback is appreciably poorer. If I play a DVD from a VIDEO_TS folder it looks as though it is dropping frames left right and centre whereas it was fine in 0.8.6.