Unfortunately, it seems that this forum is lacking in members experienced in subtitle creation, myself included.
From what you say it sounds like DVD-lab is recognising the subtitles and authoring the disc with them, but PowerDVD is not playing them. Did you just open a VOB file with PowerDVD, or did you use the "open DVD on hard drive" option and navigate to the VIDEO_TS folder? Can you select anything under subtitles in the right-click menu during playback? Have you tried a test burn onto a rewritable DVD, and playing it on a standalone?
Alternatively, if you don't mind having hard subs (aka "burnt-in" subs) instead of soft subs, and you're willing to re-encode the entire video, then I can guide you through a process using VobSub with AVISynth or VirtualDub.