There are three ways to output subtitle:
1. Select one subtitle stream: you can "Direct render to video" or "Extract to idx/sub file" in Conversion Settings panel;
2. Select two or more subtitle streams: you can only extract selected subtitles from source DVD or Blu-ray and save them as idx file and sub file.
Note: The .idx file contains the time codes of the subtitles and the .sub file contains information about the image that contains the subtitles.
3. Select "mkv.passthrough" profile, you have "Extract to idx/sub file" or "Remux into file" options to deal with subtitles.
Yes, you can. You need select the "mkv.passthrough" profile to make the conversion. The resulting MKV file is identical with the original in size, aspect ratio, original bitrate, etc.
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