If you drag the disc's VTS_01_1.VOB file into the assets window, it will actually demux the audio, video and subtitles for you. This will take several minutes on a full sized disc. You then drag the demuxed files back into their respective video, audio and subtitle streams in the movie window. Then, drag your new subtitle file into the assets window (lower left corner?) and from there, into the movie window into its own subtitle stream. There is a mechanism somewhere that lets you set the default stream as well. I'm forgetting it at the moment.
Then, under the "project" menu, select "compile disc" to re-author your disc.