VLC should automatically load the .srt file without being told to just by playing the movie file when the .srt file has the same name and is in the same directory as the movie file. Always does for me. When I get a movie with subtitles I don't need or want I always make a new subfolder to put them in so they won't get loaded. Otherwise I would have to manually disable the subtitle track after the movie starts. If you are renaming the files and they are in the same folder VLC does't need to be told where they nor asked to load them. It loads the like-named .srt by default.
As far as playing .divx movies is concerned, I could be wrong but I believe divx movies are always AVI files encoded with a divx codec. So if you change the file ext to .avi it should play as long as the codec is installed on your system. Since VLC installs all its own codecs instead of using the codecs installed on your system, just because a file plays in VLC doesn't necessarily mean its codec is installed in your system.
If you need to install system codecs to make another application work, there are more choices at this place than anywhere else:
http://www.codecs.com/
SubMagic offers a lot but I like Subtitle Edit
http://www.nikse.dk/se/ because of its help page. It also does most (not all) of what SubMagic does but it seems simpler. It also lets you view the movie inside its program window. Stick with SubMagic though if you like it and already have mastered using it. Viewing the movie just depends on installing the codecs.
The reason behind the error you were getting when you were burning your files to a disk is that .srt files are not the correct subtitle format for DVD. You need to convert your subtitle file to .sub format which SubMagic (and most of the other editors) can do for you. Then try supplying the .sub file to ConvertXtoDVD for the subtitle track instead of specifying the .srt file. Everything should work the way you want then.
Good luck and let me know if this helped.