Old versions hate modern MKV toolboxes. Use MKVToolNix (old version for Win7) to remux the file into an AVI container first, then convert.
Newer versions of Format Factory (v5.x and newer) have attempted to modernize the software, but this creates friction when running on Windows 7 32-bit. format factory 32 bit windows 7 old version new
Older versions like 2.96 have a simpler UI without the additional "bloat" or advanced features (like screen recording) found in version 5.x. 32-bit Support: Old versions hate modern MKV toolboxes