Best way to get permanent subtitles and high-quality video

[HartleySan]

My wife is Japanese and still learning English, so whenever we want to watch a movie together, English subtitles are pretty much a prerequisite.
Unfortunately, a lot of American DVDs do not have English subtitles on them. In place of subtitles though, they have closed captions, which I've given up on trying to enable through my Sony Blu-ray player and HDMI connection.
Furthermore, my wife has a number of Japanese DVDs that are region 2, which we cannot watch on our Blu-ray player, which supports only region 1 DVDs.
There is one saving grace though: Our Blu-ray player supports the playback of AVI/MKV files loaded from a USB device.

With all that said, there are two things I'm hoping to accomplish:
I want to create AVI/MKV files from DVDs that are as close as possible to the original quality of the DVDs without getting ridiculously large files (i.e., 20 GB+). This would allow us to watch Japanese movies on our Blu-ray player and still retain that "DVD experience", in terms of quality.
I also would like to be able to extract the closed captions from some DVDs, and then attach those captions as permanent English subtitles. (I am somewhat familiar with creating an SRT file, and then putting that file in the same folder as the video to view the subtitles, but that doesn't seem to work on our Blu-ray player; I've already tried.)

Currently, I am using DVDFab to convert DVDs to AVI files, but the options in DVDFab for converting DVDs is quite limited, and I cannot figure out a way to add closed captions as subtitles.

If anyone could please offer me some advice on what program(s) to use to accomplish my goals as well as point me in the direction of some good tutorials on how to use those programs, I would be very appreciative.
Thank you.

[rjd0309]

I have used CCExtractor in the past to extract closed captions. I believe that SRT is one of the output options.

http://ccextractor.sourceforge.net/

[HartleySan]

Thanks a lot for your response.

I should have stated in my original post that I did successfully use CCExtractor to extract a SRT file from a bunch of VOB files, and that that part worked perfectly. However, once I have a SRT file, how do I combine that SRT file with the VOB files when I convert the VOB files to an AVI/MKV file so that I have permanent subtitles in the resulting video file?
Also, please keep in mind that I've only ever converted VOBs to AVI files with DVDFab (and DVDFab doesn't seem to have the ability to add SRT files), so if there is some other software I need to use to complete this task, please let me know as well as show me where the tutorials for that software are.
Thank you.

Also, as a side comment, I noticed in the one instance that I used CCExtractor that as the show went on, the timing of the subtitles slowly got off more and more. In other words, at the beginning of the show, the subtitles were perfect, but by the end of the 50 minute show, the subtitles were off by about two seconds.
Is there anything I can do to remedy that?
Thanks again.

[sneaker_ger]

HandBrake (http://handbrake.fr/) should also be able to handle closed captions and do all the encoding work (H.264 recommended) needed. If you cannot get soft-subtitles to work no matter what it has the option to hardcode them into the video (called "burn in" or similar in HandBrake).

[HartleySan]

HandBrake looks awesome. Thank you.
I will play with it and report back my findings (good or bad).
Thanks again.

[manono]

There's a two-step process that should get you what you want with no reencoding at all (output quality the same as the DVD).
1. Convert the DVD to MKV using MakeMKV.
2. Embed your SRT subs into it using MKVMerge (part of MKVToolNix). Here's a guide for the second part:

http://www.my-guides.net/en/guides/general-video/how-to-add-subtitles-to-mkv-files-using-mkvmerge-gui

http://www.videohelp.com/tools/MakeMKV
http://www.videohelp.com/tools/MKVtoolnix

[HartleySan]

sneaker_ger, thanks again for that Handbrake link.
That is definitely an awesome program, and I plan on using it a lot in the future.

With that said, the programs that manono provided seem to be more what I was looking for.
I had never heard of the MKV format before, but it's really awesome (as I'm sure you all know).
I think it's great that I can easily retain the exact quality of the original DVD. That's so cool.

With all that said though, while I was able to use MKVtoolnix to mux the SRT subtitle file with the MKV file, I can't get the subtitles to show up as permanent subtitles. Is that possible?
Thank you all.
This is very awesome, and I'm learning a lot.
This is a great forum.

--------------------------------------------------------
Edit:

Please ignore my question above regarding the permanent subtitles.
It doesn't matter because MakeMKV combined with MKVToolnix properly muxed the SRT file, and from my Blu-ray player, I was able to properly select and display the subtitles.
Thank you all so much again. I can't express how awesome this all is.
Thanks.