Went crazy over this issue and solved it FINALLY... Easy as it can be.
Download
Submerge... It's as simple as it gets.
1.Open Video
2.Choose Srt
3.Export to AppleTV format
It takes about 30 minutes and all you gotta do is drag the exported video to iTunes.
Just to clear things up. I'm not getting revenue for the link. I bought it for 7€ and it's worth every cent.
I used to use windows xp, virtual dub etc... but I would have to convert it like 2 or 3 times and the quality would be a mess.
Hope you like it. I won't need to hack it to use subtitles....