Hello. I'm having a similar issue using textsub as slifoxx did in his post named "Having Problems With Textsub Settings With VirtualDub 1.6.14". I ripped the *.srt file from the mkv file but cannot reload it. I am using the textsub from Vobsub.
Make a copy of the ripped .srt file Open it with Notepad and 'Save As' - make sure it saves as 'ANSI' not UTF-8