Oh yes, there are some DVD players capable of playing DivX. Some of them are quite good. Although I have noticed that with some players, they do not display DivX files in 16x9 on widescreen television displays.
You can use .srt files on the DVD player. Although with Toshiba, they display the subtitles right in the middle of the screen. A friend of mine has a Philips DVD player, it seems to display the subtitles properly at the bottom. Another friend of mine has a Panasonic DVD player, but for some reasons, it won't display in 16:9, only 4:3 on her widescreen TV even though the DVD player is set to do so, and it won't work with subtitles either. So avoid that one, I don't know if any other Panasonic players can display them or not.
PS3 is also capable of playing DivX files, but the last time I checked, they still don't work with .srt files. That could change someday with an update, though. So what this means is you have to integrate the subtitles with the video file into a .divx file. It's quick and easy though, but they do display the subtitles properly and can be displayed in widescreen.
The video quality varies among the players. On PS3, it's quite good. Same with Philips and Toshiba (despite the subtitles' position).