I've used both a Corsair Voyager GT and Sandisk Cruzer Contour w/ my friend's PS3 and neither had a problem.

Was this high-end drive made by OCZ ? If so, it doesn't surprise me.

I'm not sure if this makes a difference but when I had those issues it's watching them with the Philips USB dvd player not the PS3 although since it's the USB's problem I doubt it.

Oh and yes it's a OCZ LOL!!!!!!!!!!!!!! smart guy

i plug my external hd into the ps3 for movies, it works flawlessly for me

I have also been doing that for years.
Only 2 problems with me is that since I already have 2 computer monitors connected to my computer, when I want to watch a movie on the TV, I have to get to the back of the PC to switch the DVI wires.
The other problem is my PC can't handle the 1080p movies I have, lol.

OCZ's flash drives always seem to have issues ...

I tested my GF's OCZ Rally II and my mom's OCZ Rally + whatever their mini drive is called and they all had the same problem: Incredibly inconsistent read and write speeds under NORMAL operation (well, the mini one was consistent, but painfully slow regardless). Transferring photos, compressing/uncompressing files, playing videos, etc. It would go fast for like 10-15 seconds, then pause for a few seconds, etc. It seemed to get worse the more you were accessing on the drive. For video playback, we noticed that when we played it off the PS3 (the HTPC had a fan die, so it was shut down for the night), it had the same problem you described. I put it on the Voyager GT (died about a year ago) and it performed perfectly. The Cruzer Contour has also played HD video perfectly as well.

I suspect they use a shitty memory controller in their drives. Maybe their new high-performance ones are better (ATV series), but w/ Costco always putting 8 GB Sandisk Cruzer Contours on sale for close to $20 (easily the best and fastest drive I've ever owned. Don't let the relatively low advertised speeds fool you. It absolutely DESTROYS every other drive I've tested in real-world scenarios like transferring pictures, transferring large files (Disc images, videos, Windows Service Packs, etc.), compressing/decompressing .RAR files, loading/playing 1080p video, etc.), I doubt I'll ever buy an OCZ drive again.

Can Tversity give subtitles on movies through PS3? and how to set it up?

Last night I just put a movie on Tversity media server, and have ps3 run it. My ps3 remote subtitle setup could not function.

I've never run subtitles (except when I got tricked into watching Pans Labyrinth, ugh) but they'd first have to be included with the movies you want them for (there are sites to d/l just the subs) then you might have to enable subs in TVersity, or worst case scenario hardcode the subs onto the video and play that. The subtitle function on your remote won't be able to do anything here afaik.