I experienced strange subtitle encoding behaviour. I have these two subtitle files in the directory along with the movie: "Knight and Day[2010]DvDrip[Eng]-FXG.en.srt" and "Knight and Day[2010]DvDrip[Eng]-FXG.cz.srt". I use "Eastern European (Windows 1250)" encoding and the Czech version of the subtitle file has wrong characters with diacritics. When I rename that English srt file to just "english.srt" the Czech subtitles are now alright. When I rename the English file to its original name the Czech encoding is displayed wrongly again. Strange, huh? Btw, I miss the Central European encoding settings, I use that in other video player app and its always okay.
PS: I have Mac OS X 10.6.4 and VLC version 1.1.3