I have a film in the .AVI format, with an SRT subtitle file, and an AC3 audio track.
I used the S/W decoder function.
The film can be played with/without the subtitles, and the AC3 file itself can be played. I have tried MX player (not PRO) with the ARMv7 codec and VPlayer with the ARMv7 codec. I have the same problem on my Nook Color. If I stop the film and try to select audio, I have the only item which means embedded audio track.
I ended up preferring films in the .MKV format and using mkvmerge for merging audio tracks and subtitles into a video file.