I did some more testing, you are actually able to convert he M2TS file in 1 single step using only Elecard Xmuxer Pro
Again only works on Mpeg2 Blu-ray
Open Xmuxer Pro, Drag M2TS into the Remux secion, click double arrow, click output chose MPEG Program Stream, then click Start. Thats all.
To make it more compatible, and usable for xbox 360 streaming, chose only 1 audio file before clicking start. to make it usable on ps3, you will need to chop it into < 4GB parts
you will still not get AC-3 audio in the XMB with any posted solutions.
Preliminary tests only, Your Mileage may Vary.
Hope it helps.