Step 1 - Since LSX only supports one input, i'm using DVD2AVI/VFAPI and VirtualDub for framserving, i've enabled the Video and i've also enabled the "WAV Audio" and selected the WAV file that was generated by DVD2AVI earlier so both the Video and Audio will be frameserved into LSX, and i've created a "fake" AVI file instead of VDR as used in Step 4c on VirtualDub. If you are using a regular AVI file, you do not need the frameserving steps.
NOTE: Do NOT use the Install Handler as shown on the Pre-Steps on the VirtualDub section!

Step 2 - When opening the "fake" AVI generated by VirtualDub, LSX will give you the following information.

Step 3 - An "Output File" will automaticly be selected, you can of course change the default name, in the "Stream Format" you can select the type of encoding you want, supported are "Video-CD ", "Super Video-CD" and "DVD", for this example i've used the regular "Video-CD" Standard.

Step 4 - Pressing on the "Advanced" button will give you much more control over how to encode the movie, all menu items are very self-explanatory, so here are just two menus out of them as examples.

Step 5 - When you are done with the "Advanced" menus, press the "OK" button, which will bring you back to the main program, select the "Action" and then the "START Encoding" or press "Alt-R" to start the encoding process.

Step 6 - This is how the encoding window will look like, as you can see, Subtitles exist thanks to VirtualDub (Steps 2a to 2h).

Next - Splitting large MPEG files to fit CDR media! or Authoring [Burn! Baby Burn!]