Okay - I am gonna take the plunge and purchase the 32gb V5 ... thank you for your input on this!

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Okay - it has arrived!
Thus far I really like it ... am going to see what else I can do with it.
The sound quality is quite good.... The touch based control interface will take a little getting used to, I think, but it will not be a steep learning curve at all.

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I fixed it Mycanid, it requires a separate SRT file named the same as the video: as in, you can't have it read an SRT stream from a MKV.
The video playback on the V5 is nothing short of beautiful, though. Certainly worth it if you purchase 16GB + 16GB SDHC, which ends up being around the same price of the 32GB iPod touch.
Video on the iPod classic is terrible.. what is it, a 2.4" screen or something? I own one myself, just so I can carry my whole library with me when I go on long trips or vacations..
I did a test on this as well, primarily b/c today (May 27th) Cowon released another firmware update (v.1.09) ... embedded .srt files in avi files seem to work quite nicely.
.mp4 files with .srt files as separate files of the same name work flawlessly. I was watching Princess Mononoke in mp4 format and was amazed at how BEAUTIFUL it looked!
.mkv files are a bit problematic when it comes to subtitles, however. Some .mkv files have the option for two different types of subtitles as well (.ass or .srt) ... that can create difficulties as well. It will likely take a bit of tweaking. A pity since, as someone pointed out earlier in the thread, many things available are in .mkv format.
I agree wholeheartedly with everything else killazys has said about the device. Video files are absolutely BEAUTIFUL and the subs are not difficult to read either.
In terms of subtitles. it says on Cowon's site that it supports .srt and .smi files....
Source:
http://www.cowonglobal.com/zeroboard/view.php?id=B15&page=1&sn1=&divpage=1&bmenu=support&sn=off&ss=on&sc=on&keyword=V5&select_arrange=headnum&bmenu=support&desc=asc&no=694&bmenu=supportEDIT - newy: I already merged your photothread... Refrain from TRIPLEPOSTING!