I'd prefer them burned in and theatrically accurate (fades and all), like they are in Harmy's Despecialized and schorman's AOTC HDTV release. But that's just my preference, of course, and it's your release, so do it however you want! Either way is better than the crappy burned-in ones on the HDTV version.
(I'll probably just make my own version with burned-in subtitles for myself if you stick with the .ass/.srt method, anyway.)