Tested SRT in a MKV and it worked in powerDVD, Demuxing MKV now to grab SRT to test as a separate file
while I'm doing that, Download this
http://jamat.krawhitham.com/MKVchecker.7z
when ran it will ask for your MKV file, it will scan it (using tsMuxeR) and make a file called MKVinfo.txt. Post what is in the MKVinfo.txt file