i had the EXACT same problem. this works PERFECTLY.
k. 1. so download the newest version of virtual dub mod. This is perfectly safe freeware, don't worry.
2. Next, go here:http://www.virtualdub.org/virtualdub_filters.html and download the first link there, called subtitler2 -4. This will be a .vdf file.
3. Download any SRT to SSA (sub station alpha is a much better subtitle file, you can change font, colour etc of all you srt's if you want too).
4. open virtual dub and open the video file you want.
5. in virtual dub, go to videos>filters>add>load> and find the subtitler.vdf file you downloaded. click it.
6. There'll be a long list of filters, scroll down click subtitler and click ok.
7. Click the three dots that are now there and find the .ssa subtitle file you want on your movie. click on it.
8. finally, check under video and audio and make sure full processing mode is clicked
9. lastly, file>save as avi. AND BAM. It makes a new avi file with your subtitles on it without losing ANY quality. LITERALLY. It doesn't touch you're video file's quality, just mixes the subtitles in.
GOOD LUCK =D
oh and i would use a different burning program, such as nero 9 to burn the movie. BURN IT AS A DATA FILE. dvd maker tries to change the file entirely so just burn it as a data disc and u can pklay it on pc, ps3, and xbox. Some dvd players may not be able to handle the file (depending whether it is a divx or xvid codec)