It's been working on my HTPC for over 2 years now, but it did require some futzing around.
If I remember correctly, you can't use hardware accelerated ffdshow (unless they've fixed that recently). Use software decoding, and then use directvobsub for the subtitle engine.
Also it helps to only have forced subs in your mkv, for english movies that have occasional foreign dialogue, as I don't think directvobsub can distinguish between forced/unforced subs.
Again my information is somewhat old, since it's been working for a couple years on my HTPC.