Converting from .MPG to .M4V

QT does not export the sound track from muxed mpeg files: QT Mpeg Limitations
This freeware will do the export for mpeg-1 by itself. Mpeg StreamClip, but I am not sure if it will export directly to m4v. You may have to use an intermediate codec, like animation or component video (both are uncompressed formats so you don't lose any video quality using them) and then make the m4v from there.

.m4v is functionally the same as .mp4, and MPEG Streamclip DOES do .mp4 directly from MPEG. BUT, I've found that the scaling algorithm that MPS uses leaves aliasing that looks bad on a television (not that it looks crystal clear otherwise, but in a side by side test, you can clearly tell what was encoded by QuickTime and what was encoded by MPS.

To compare, I also tried iSquint (another freebie) and it came closer to what I got from QuickTime on the same clip. I haven't sent feedback to the author of MPS yet to see if this can be fixed, but iSquint is a good second choice.

I'm having the same problem.. No sound! I thought quicktime was supposed to be able to convert these files to be able to see and hear them on the ipod...

Nope.
QuickTime Pro has never exported the audio portion of muxed file formats.
Use the tools (software) like MPEG Streamclip (free) to convert your MPEG files to QuickTime formats, or directly to iPod friendly formats.