How long is it supposed to take to make a proxy?

Here is the full story.

So I'm trying to edit a 480p 20 minute long MKV file. However, when I put that file into Premiere, playback was very slow/sluggish/non-existent. It was unusable for editing.

At first I thought that it was because Premiere doesn't accept MKV so i re-muxed it into MP4. However, the problem persisted and I found out that Premiere does accept MKV after all.

Then I did some more research and found out that the most likely culprit for the sluggishness is the fact that the video is encoded in HVEC which is a highly compressed codec. That probably explains why the audio worked perfectly in playback but the video was completely broken.

So I decided to try making proxies out of the original file and editing with that since it should be a lot quicker. However, one proxy takes 2 hours per 20 minute MKV file.

So I decided to try transcoding the file with Media Encoder into a different codec (h.264) while suffering some quality loss.

This seemed to finally fix the problem. When importing my newly transcoded h.264 file into Premiere, I could edit it nice and smoothly, both video and audio.

Until I got past 10 minutes into the file...

For the first 10 minutes everything is fine and the trancoded video is playing back as it's supposed to. However, after around the 10 minute mark or so, the video portion loops back to the beginning while the audio portion keeps playing.

So like at minute 15, it's the audio for minute 15 but the video for minute 5. I tried both trancoding it to GoPro Cineform and h.264.

The problem persists. I can even see it start to loop in the output preview of media encoder. Is this a problem with my source file or a problem with Media Encoder? Is there any way to fix this?

All of this is from me trying to edit a simple MKV HVEC file. That file format is extremely common. I don't understand what I'm doing wrong. I've been trying to fix this root problem for like 2 days.

My system is Windows 10, Intel i7-7700k, GTX 1050 (2GB vRam). 16GB Ram. Do you have any advice at all?