You really aren't providing enough information. There are two types of formats for subtitles. Text formats like srt, ssa, ass, etc. and also graphical ones like vobsub, bitmaps, and pngs. If you want to be able to turn the subs on and off (called soft subbing), you mux the subtitles into the avi as a separate stream, which can be read back and shown with the video by filters like VSFilter (used to be called Direct VobSub). Some players also have support built in, although it tends to be very poor (MPlayer can't handle most of ssa's advanced features, nor ass, etc.) and several can only read subtitle streams from more modern formats like mkv and ogm rather than avi (probably why soft subs are often left external). If you want to turn subs on and off on a DVD, you need the graphical type. Programs like MaestroSBT can render the bitmaps needed from various text formats like ssa and then they can be used with the usual DVD authoring programs.
If you want to just hard sub (render the subtitles onto the actual video), there are various filters for that depending on your video editing apps. VSFilter works as a plugin for VirtualDub and AviSynth, for example, and there is another plugin called TextSub or something like that. Hard subbing isn't recommended, however, because it hurts the compressibility of the video (subs are sharp edged), and doesn't allow any user choice in the way of on/off/size/color.
Splitting a text format subtitle is trivial, you just edit it. Many consist of just the lines and the time stamps. Formats like ssa have a header first that you would keep with both the first half and the second half. You can't edit vobsub files afaik, since the format isn't documented (it's just the subtitle picture information pulled directly from the vob). I've heard you can compress them, however, and that VSFilter will still read the stream properly. There are several tools, aimed at the DVD ripping crowd, that let you OCR vobsub subtitles into a textual format which you could then edit. The text versions are smaller re file size and provide the configurable font/size/color/placement advantage as well, so good DVD ripping groups always do the OCR rather than leave the subs in vobsub format.
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