I looked into it a while ago you need to generate a subpicture stream that you can mergo into the IFO data as well as the MPEG stream. The IFO is how the DVD player knows "hey there's a stinking subtitle in there!"
Cyb's simple way of putting it. DIVX came out with a new scheme for DVD players that uses a subpicture in DIVX format. I would have prefered a real font rendering system instead of relying on subpicture data. Perhaps a GNU DVD format spec would be cool? Ie compress audio video and text streams with Theora Xvid or divx into the theora container format. The difficult part is getting something to render textual information to the display in a nice manner.
Cyb