As far as I know, the PS3 supports subtitles embedded in an AVI (DivX) file, but I don't think it supports external subtitles. I just tried PS3MS and it transcodes files with SRT subtitles to merge them into a video stream. I'd be happy to be proven wrong though and be able to implement external SRT files for the PS3
I have been using PS3 Media server as an alternative to Mezzmo for external subtitles, and they work just fine as long as you name the .srt file equal to the movie file. I bought mezzmo because I had some issues with ps3 media server bandwith but I'm not really using it because the lack of external subtitles.

I can say that the video quality of mezzmo seems a bit better than PS3 media server but the lack of external subtitles really kills it for me.

We all seem to have waited a long time for this update, hope it comes sooner than later