It really depends on how fancy you want to get. Since you're starting from scratch, you have the freedom to map it all out.

If you just want subtitles without any interesting formatting (i.e. beyond italics), and placement is going to be in a consistent, standard location, then just create an SRT file using any of the tons of subtitle editors out there. I actually prefer SRT because I can focus on the content and not the presentation. However, if you want to get all fancy and have subtitles that are (for example) positioned under the speaker of that particular line, go for a more advanced format that can contain positioning information such as ASS. You can make this exactly as complicated as you like.

As for timing, different editors offer different ways of doing it. Some allow you to line up the subtitles to the waveform of the audio track, but I actually prefer to do it visually by watching a preview of the movie with the subtitles overlaid. There is a lot of trial and error and guesswork, but generally it's pretty clear when a subtitle "works" and when it doesn't.

To convert an SRT file to a BD-SUP/BDN+XML format for burning to disc, I recommend easySUP. This gives you a lot of flexibility about typeface, positioning, color, border/shadow, etc. Some BD authoring tools may allow you to plug in an SRT file too, but I doubt you'll end up with quite the level of control easySUP gives you. Also keep in mind you need to install AviSynth for easySUP to work.

I'd also look at some subtitling style guidelines, even if you opt not to follow them to the letter. The BBC has some pretty thorough ones online, I believe.