Convert MKV to AVI with Minimal Loss Using FFmpeg

To convert an MKV to AVI, I do two things. The first thing I do is this:

ffmpeg -i filename.mkv -vcodec copy -acodec copy output.avi

or this:

ffmpeg -i filename.mkv -sameq -acodec copy output.avi

Either of these will convert the MKV to an AVI, but the problem is that the video does not play smoothly for some reason. That's fine though, because if I do one more thing it gets fixed:

ffmpeg -i output.avi -vcodec mpeg4 -b 4000k -acodec mp2 -ab 320k converted.avi

After I do this then the file plays without problem. I had success doing it this way for one file, but then I tried it on another file, and there is a slight, but noticeable loss in video quality. This is the output I get when doing the second step:

FFmpeg version 0.6.1, Copyright (c) 2000-2010 the FFmpeg developers
  built on Dec 29 2010 18:02:10 with gcc 4.2.1 (Apple Inc. build 5664)
  configuration: 
  libavutil     50.15. 1 / 50.15. 1
  libavcodec    52.72. 2 / 52.72. 2
  libavformat   52.64. 2 / 52.64. 2
  libavdevice   52. 2. 0 / 52. 2. 0
  libswscale     0.11. 0 /  0.11. 0

Seems stream 0 codec frame rate differs from container frame rate: 359.00 (359/1) -> 29.92 (359/12)
Input #0, avi, from 'output.avi':
  Metadata:
    ISFT            : Lavf52.64.2
  Duration: 00:04:17.21, start: 0.000000, bitrate: 3074 kb/s
    Stream #0.0: Video: mpeg4, yuv420p, 704x480 [PAR 229:189 DAR 5038:2835], 29.92 fps, 29.92 tbr, 29.92 tbn, 359 tbc
    Stream #0.1: Audio: vorbis, 48000 Hz, stereo, s16
Output #0, avi, to 'converted.avi':
  Metadata:
    ISFT            : Lavf52.64.2
    Stream #0.0: Video: mpeg4, yuv420p, 704x480 [PAR 229:189 DAR 5038:2835], q=2-31, 4000 kb/s, 29.92 tbn, 29.92 tbc
    Stream #0.1: Audio: mp2, 48000 Hz, stereo, s16, 320 kb/s
Stream mapping:
  Stream #0.0 -> #0.0
  Stream #0.1 -> #0.1

I just used arbitrarily large settings on the second step and it worked nicely before but not in this case. What settings should I use?