Basically, you'll have to re-encode the video to include the subtitles (this is also known as "hard" subs; subtitles in a separate file as with .srt files are "soft" subs), which will bring down the quality of the video somewhat.
ffmpegX has the ability to overlay subtitles on a re-encode, so you could try that.
EDIT: Ok, so I forgot to mention that you might in theory convert the subtitles to actual DVD-subtitles, convert the audio on the MPEG file to be DVD-compatible (48 Khz), then mux it all up and play it as a regular DVD with subs. But I don't know how to do that.