Guess what OF...? You'll not be surprised to hear that... you're 100% right!
What seems to happen is as follows...:
1) If subtitles are enabled (displayed) from the button on the remote, then they get recorded.
2) If subtitles are disabled from the button, but I set that obscure menu option to 'enable subtitle recording', then it just seems to override the remote's button for the duration of the recording, so they are displayed on screen during recording and, accordingly, added to the recording.
In either case, when the recording is played back, subtitles are 'permanent', you can't switch them on and off.
I'd love to know why subtitles aren't handled better. With my (very) limited undesrtanding of MPEG streams, I thought subtitles were just encoded in the MPEG. The recorder 'understands' MPEG, as it can decode the broadcast MPEG and generate the recorded MPEG, so why can't it just put the subtitles back in their original form?
I know this is getting somewhat off topic from the original post, so I'm hoping Uncle UB is still enjoying the debate he's spawned