I experimented a little. Instead of using the PSG subtitle extracted from BD disc, I downloaded a SRT file from internet and mixed in. It works even when I streaming from my DLNA server! But the subtitle font looks pretty ugly. I guess that's why BD titles use graphics subtitles.
Yep, the default sub font looks pretty ugly and horizontally stretched out. There are some alternatives if you want to keep the look of PSG subs though. You can use BDSup2Sub to convert them into DVD-compatible VOB subs that have much wider support. Alternatively, you can embed custom fonts within the MKV and make SRT text-based subs look a lot better.