The Xbox 360 can no longer receive updates to applications and thus is unsupported. You can read the thread regarding this here.
The reason that you can not select subtitles that are not part of the file is because that functionality was added recently and the app on that system has not been updated for quite some time. When you play it on your phone, the subtitle gets cached for your user in the database and will then be used as default for other playback devices.
