To be honest, I have no idea about the subtitles; I've never used them with my streaming files.
Regarding video quality - I have my PS3 on a wired connection to my router, and I do not have any lag, and video quality is superb. Do be aware that I use it with 720p files at most. It could very well lag with 1080p, but I do not know.
You can post the question on the tversity forums and you should get a quick answer. It took a little bit of fiddling and configuration before I was able to stream all types of files, but once you get it to work, it's all worth it. I keep all my files on my PC, and it does not take up space on my PS3's harddrive, nor do I need to transfer any files to an external drive of any type.
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