This required quite a bit of effort and all the information I found on the topic was very misleading. Do no use the weird programs that are suggested, coverter203 or whatever silly name they’ve come up with.   Some good old fashion tools work perfectly.

Slowly but simple

The slowest way is to do it in realtime.  That means if you are converting a 40min file it will take 40minutes.  Yeah that sucks but you can always leave it running at night and it’s easy.  First install AviSynth and VirtualDubMod then create a new file with notepad to contain DirectShowSource(“PATH TO FILE”) where PATH TO FILE is the actual path to the file. You have to make sure the file name containing the one line has the extension .avisynth so VirtualDubMod knows what to do. That one line when loaded into VirtualDubMod will start converting the file.  You will have to specify a place to save it.

A Bit Quicker but complex

You’re going to need VirtualDubMod, avc2avi, mkvtoolnix, BeLight, and MKVExtractGUI.  To set this up you should place the MKVExtactGUI files into the mkvtoolnix folder.  Keep track of the output directory for this next step.  Using MKVExtract you must separate the video and audio parts of the file. Then with BeLight you will convert the audio, which is the .ac3 file, to an mp3.  You can leave all the settings default in BeLight, if anything you can change the quality on the mp3 tab to 100.

Now that the audio is converted open a command prompt, “cmd” in run, and navigate to where the avc2avi.exe file is saved.  The command you will use will look something like, “avc2avi.exe -i inputFile -o outputFile”. The input file is the .h264 file that was created using the MKVExtract.  The output file will be an avi file.  Note: You might have to set the frame rate, the default is 25fps however usually files are 29.97. The flag to set the frame rate is “-f”.  If you notice the audio is off on the final file then your frame rate is probably off.

Now after you have the .mp3 audio and the .avi video files combine them in VirtualDubMod and make sure you pick Direct Stream Copy in the audio AND video settings. This is what makes it fast, since everything is already converted all VirtualDubMod has to do is combine them into one .avi file.  After it is combined you’re done!