I'm running an i7 920 clocked to a bit over 4ghz on water. It flies through encodings but I still want to go faster! The 6core is too much cash, the new SandyBridge hardware looks VERY good and ought to do 5ghz with my cooling system so consider this closely if you MUST have new hardware. I have beaten guys with dual 4core XEON systems with my i7. Given a choice, with budget a factor, go more cores\threads over more speed. I have had older 4core CPUs of the Q6600 class running slower STOMP C2D running faster clocks. Multi-threading FTW!
That said... I have looked at some of the commercial software out there.
MediaConverter7 is the best I've found so far. It will use my NVIDIA GPU (not a high end one) AND my CPU. It doesn't max out my CPU though which is odd. Anyway, it can do a BD encoding in under an hour - seriously.
That is about 2.5x faster than my CPU alone and a big change over software I tried out a few years ago that ONLY used my video card and not CPU - same video card too.
That said, they only give base and main profiles but with tweaking the quality looks to be equal to my original setup. It's only $40 or so but I've not decided to switch to it fulltime just yet. On a budget, and possessing a supported GPU, I'd try this for the price for sure - they have a decent trial period. Yeah, this is Windows software but the speed is sure damned nice! Oh, it supports writing to MKV containers but insists on inserting an audio track <shrug>