OK! I'm going to take this off of fast forward for a moment and put it in rewind so I can be sure I understand it.
You say that after going to the Open file menu and Browsing for your video file and then checking the Subtitles box and Browsing for your subtitle that when you press OK VLC can't find your sub file?
I did leave out the advanced settings as it didn't seem to have any bearing on the problem. The ISO-8859-1 character set, often simply referred to as Latin 1, can represent most Western European languages including: Albanian, Catalan, Danish, Dutch, English, Faroese, Finnish, French, Galician, German, Irish, Icelandic, Italian, Norwegian, Portuguese, Spanish and Swedish.
This should work for everything in the western world and I always thought was the default, based on one of these languages.
If I understood this correctly please post the exact filename. If I didn't, which is possible,
then repost your question. But it does seem unlikely you would be struggling with the same file(s) for weeks.
If the problem is simply the sub not automatically showing up, right click on the video while it's playing and select subtitles, then select your language. SRT subs generally only have one language but you can stack files. Movie1.srt, Movie2.srt etc. will all be loaded. This is part of the fuzzy options in Preferences for subs. This action is being made more automatic for various formats in 0.8.6.