Following this tutorial I installed VobSub in my VD folder, selecting the VobSub and TextSub options in the installation process. Then in 'VD > Video > Filters' I added the TextSub filter and picked my subtitles. I could then see the subtitles displayed in the video. Finally, I picked 'Video > Normal recompress' and chose Xvid in 'Video > Compression'. I saved as AVI.
The resulting file should include embedded subtitles, yet this is not the case. Why not ?