Here is a link for a tutorial for adding soft subtitles to iPhone, iPod, iTunes, QuickTime:
http://ncam.wgbh.org/mm/m4vsubs.html
Kudos to National Center For Accessible Media (NCAM) for squeezing Apple to cough the info.
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N.B. If your language is not supported by Apple you will get "unknown" when you try to select it in iTunes or QuickTime. For twisted reasons it wont show at all on iPhone. So choose english (eng)!!!
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