You should be able to play media with a supported 5.1 audio format and PGS subtitles without the video transcoding.
The Plex LG app added support for PGS subtitles in August 2022. Set the app to Burn Subtitles = Automatic. Check that both Direct Play and Direct Stream are enabled in the app settings.
Monitor playback via Plex Dashboard → Now Playing + Expanded Info. That will show you if the media is direct streaming, such as when the audio is transcoding.
Looking at the E7 specifications and rtings.com review, it supports Dolby Digital (AC3), Dolby Digital Plus (EAC3), and DTS audio formats, all of which can be passed to the Onkyo via HDMI-ARC (if DTS-HD audio is selected, only the lossy core 5.1 will be passed).
Assuming the Onkyo supports those audio formats, you should be able to play media with those formats and either PGS or SRT subtitles without forcing a video transcode.
TrueHD + subtitles will always result in a video transcode.
