How to play movie with subtitles using DLNA server?

It depends on the DLNA server software. Samsung PC Share Manager supports .srt subtitles, but Windows 7 DLNA server doesn't.

There are two versions for this:

The first one is that the TV supports the playing of the subtitles, in which case it will request the subtitles from the DLNA and display it (usually, there's a button on a tv remote to turn on the subtitles explicitly - on Sony there's a button with four dots inside the square (....) that turns on the subtitles). Usually, the subtitles have to be in the same folder where the video is, and with the exact same title. But, not all subtitle formats are usually supported (e.g. srt, etc), and this varies from vendor to vendor.

The other option is for the DLNA to send the subtitles along inside the video image. For this, you need transcoding. Transcoding is usually used when the TV doesn't have support for the source video format and the DLNA transcodes it to a format TV can play, but in the case of subtitles, the DLNA has to transcode just so it can insert the subtitles into the movie image. Some DLNA servers usually have an option to 'always transcode when subtitles found'.

No, DLNA currently does not support subtitles per se. Samsung supports SRT subtitles as a proprietary extension to DLNA, but only samsung readers can benefit from it. DLNA engineers did a terrible job on the specifications. I hope they fix this on a new revision. DLNA is one of the lamest specifications I've seen so far.

Based on this site, I ended up using Serviio DLNA server. It installs as a service on Windows (nobody has to be logged in on the PC), supports subtitles on my LG TV (LG 55SJ810V, webOS 3.5), and it automatically scans the shared directories for updated content, although I had to check Use the poller mechanism for monitoring this folder option: in the shared directory settings, and I have to turn the TV off and on to pick up the content changes.

Yes, but it probably depends on which hardware/software your are using! Normally it should work just by placing subtitles in the same folder as the video file, but perhaps some setting to always transcode (even if the target device knows the format) could help if you have problems.

If you do need to merge subtitles with video files, you can soft-merge using the mkv (Matroska) container format with a tool like Mkv Merge