Subtitle functionality in MC is working fine, as designed, and consistent with movie standards. At least last time I checked, which was a little while ago. Also, those standards are quite loosely interpreted by many optical disc producers.
Option 1 is horrible. Don't do that. To do that the whole movie has to be re-encoded, with the subsequent loss of quality which happens with every re-encode. Once done you can never again watch the movie without subtitles, because they are burned into the video frames. Horrible. Unless the subtitles are actually encoded using the VOBSUB format, but in that case they can be turned off.
Option 2 is a lot better. Basically, those subtitle files that are labelled "forced only" are just normal subtitle files, which you have to turn on to see. Typically they are SRT text Subtitle files that only contain Forced Subtitles. So they aren't using the MC Subtitle functionality very well.
So Newsposter, what you are calling "part-time subtitles" are actually called "Forced Subtitles". Do a little research on what they are, as that will help in your understanding and use of them.
Basically, with Subtitles turned off, Forced Subtitles, if they exist in the video or a supported file format, will be displayed. SRT files don't support language definition or Forced Subtitles functionality as they are intended. PGS and VOBSUB do support Forced Subtitles.
Set your Default Audio Langauge. Set your Default Subtitle Langauge. Set the Subtitle Mode to "Show subtitles only if selected language is different from audio language". If Force Subtitles are available with the video, such as you would be used to seeing with DVDs, then MC will show them. If they don't show, Forced Subtitles aren't available in or with the video. Then option 2 is the best choice.
A search of the Forum for "subtitle" will find lots of discussions. Take note of what Hendrik says. Not only is he a JRiver developer, he uses Subtitles a lot. A search of the
Release Notes for "subtitle" will show that there have been lots of changes recently, mostly to support Closed Captions.