MP4 is still more compatible, but it no longer matters to most Plex users.
The players built into many TVs and set-top boxes didn’t support MKV directly, but did support MP4 directly. Plex originally relied on those built-in players.
In the last few years Plex has enabled “enhanced” players for at least AppleTV and Android devices, and those support MKV.
https://forums.plex.tv/t/early-access-for-plex-pass-users-to-new-apple-tv-ios-video-player/
It’s also a perfect example. If you’re an Apple TV user, are you an Apple desktop/laptop user? On the desktop, Quicktime can play MP4 directly; you need VLC or IINA or mpv to play MKV. That’s a good reason to prefer MP4, if you don’t have another reason to prefer something else. 
If you have a DS218j and are using DVD material, take @tom80H’s suggestion to use the Handbrake preset.
Drop your DVD or rip on Handbrake
Preset → Devices → Apple 540p30
Check the “Save As:” location at the bottom
Hit Start
That will make a file:
- In an MP4 container
- With H.264 video
- Up to 540 pixels tall, as necessary (plenty for DVD)
- Magically cropped + appropriate anamorphic settings
- With reasonable quality settings for DVD
- With both AAC stereo and AC3 surround audio (if present)
- With foreign “forced” subs burnt in
That should be compatible with just about anything, low bitrate, and easy to play in most places.
Give that a shot first, see if it works for you, see what you like or don’t like about it.
There are some obsessive things I would change, but they’re based on nitpicky things that I like.
