A symptom of this issue is that you have to wait before you can start playing the movie. So if you wanted to play a 1 GB mkv the player had to read the whole 1 GB from disc once, which took a fair amount of time back in the days.

Afaik playback performance is not affected by this. Poor playback performance is mainly related to the lack of hardware acceleration (and codec optimizations) people take for granted since h.264 matured on OS X.