In the interests of keeping this thread up to date and useful for people who may be coming to it and skipping to the end looking for a solution, here’s a quick update for anybody still playing along at home.
Current status as of this post on 2020-12-28:
Server version: 1.21.1.3830
Android client version: 8.11.0.22186
Issue is still unresolved - The “text only” directly play mode on the Android client still can’t handle even dead basic stuff like overlapping lines and transcoding by the server is necessary to get styled SSA/ASS subs to display properly. The reduction in quality to achieve this on a variety of files is still unnecessarily bad (even in comparison to other server/client media collection solutions - see my post from May) regardless of tweaks to the transcoder’s settings on the server.
Your best option to direct play your SSA/ASS subbed anime, jdramas or other media on Android devices like the Nvidia Shield, Chromecast with Google TV, etc. is still to use Kodi as your client app - either with the offical, semi-maintained Plex Addon for Kodi (has the bonus of using an older style UI for those who aren’t fans of the current Plex client UI) or with unofficial addons PlexKodiConnect or Composite.
For Plex, Inc: Your paying customers are still waiting for some signs of life on this one, ladies and gents.