AVI and Mpeg2

Afraid not, only limited spec MPEG-4/h264 movies:

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Video formats supported

* H.264 and protected H.264 (from iTunes Store): Up to 5 Mbps, Progressive Main Profile (CAVLC) with AAC-LC audio up to 160 Kbps (maximum resolution: 1280 by 720 pixels at 24 fps, 960 by 540 pixels at 30 fps) in .m4v, .mp4 and .mov file formats
* iTunes Store purchased video: 320 by 240 pixels or 640 by 480 pixels
* MPEG-4: Up to 3 Mbps, Simple Profile with AAC-LC audio up to 160 Kbps (maximum resolution: 720 by 432 pixels at 30 fps) in .m4v, .mp4 and .mov file formats

Audio formats supported

* AAC (16 to 320 Kbps); protected AAC (from iTunes Store); MP3 (16 to 320 Kbps); MP3 VBR; Apple Lossless; AIFF; WAV
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That is unless you are prepared to hack it and invalidate your warranty as some people have apparently done - it's not that it can't play these formats it just isn't set up to do so with the appropriate codecs. This may or may not officially change, but I wouldn't hold your breath waiting!

AC

Sorry FerFer but I rarely bother with subtitles though I appreciate many people do.

Subtitles I suspect are stored digitally and displayed in relation to timecode queues on DVDs which is why you can choose to show them or turn them off - in other words they are not part of the picture but overlaid onto it.

From what you suggest Handbrake may encode the subtitle text as part of the movie frame during encoding whereas in Nero recode 2 the subtitles are generated dynamically so presumably the subtitles are stored separate from the video frames.

Hopefully someone will point you towards a fix of some sort but I wouldn't expect Apple to use Nero recode formats if they are proprietary Nero technology.

Good luck.


AC