I read the whole post and I would like to add my 2 cent to this and hope that will help provide some more information or better understanding to everyone and maybe help developer whom wil be motivated in future to try to make this work one day for Handbrake.
Closed Caption (CC) is a USA NTSC encoded. It pretty similar to Europe PAL Teletext but USA took this idea and slightly changed it to make it work for NSTC and encoded it into line21 of Vertical blanking interval on the video.
Those CC encode show up as a white lines across the top of the video which you don't normally see it on TV because of the overscan but it can be seen on computer viewer or player since it can show the entire VBI lines which you have to adjust the overscan to hide it.
Now I have read on internet that lots of folks think CC and Subtitle are the same thing which is not true at all. CC is embedded into the video itself and does not use separate file while the subtitle is a separate file which play in sync with the video file. So this make it easier for the developer to write a transcode software to read from a subtitle file and burn it into the video when encoding.
In the USA, CC is much more popular than subtitle because CC author actually include every possible sounds that is heard on the video even background sound or music while subtitle author only write what people are speaking in the video. That why you see so many folks with hope that some day they can encode CC into digital video because of the better information you get from CC than you get from subtitle. As it mentioned in other post that lot of movie companies releasing DVD movies try to save cost by omitting English subtitle since they have to embed it with CC but they would include French or Spanish subtitle etc on it and it is why you don't see very many English movie with English subtitle since it was closed captioned to being with and it was stripped when encoded into digital format.
Closed Caption - Created for deaf people in their own same language and since they cannot hear so CC includes more information like background sound or music etc.
Subtitle - Created mainly for hearing people in different lanaguage than their own and since they can hear so no need to include all those "extra" information in the subtitle.
Now since CC is analog and DVD is digital so they have to format it on DVD to emulate analog line21 video out to tv so the tv still can decode it. Popular tuner card like Hauppauge have released driver "CCinDVD" which saves CC into DVD format and can be read back by most mpeg player that support DVD CC like Mplayer. To play CC on Mplayer instead of -sub subtitlefilename.srt for subtitle you just replace it with -subcc to have Closed Caption in your playback.
CC is much harder to encode in another format since you would need to get the information from line21 format and convert it to a readable text then burn it on video so I do understand why developer have a tough time with closed caption because it not ready available as a separate file like subtitle and I would like to mention that Mplayer's Mencoder can decode closed caption and burn into the video but in subtitle format so it not really going to be closed caption however it will retain all CC information even background etc. Even latest SVN Mencoder are capable of doing scrolling captions after I have worked with one developer to include support for scrolling CC last Nov in Mplayer and Mencoder.
On I am sure all the developer here know what mencoder is and since it an open source perhaps it could help you or give you some idea how the function works and how to add it in the Handbrake. To encode CC from mpg that have CCinDVD format using mencoder is just like subtitle -sub subtitlefilename.srt instead you replace it with -subcc
Here an example of transcoding with mencoder and burning CC into video. You just transcode with mencoder with flags you normally use for encoding and add -subcc -subfont-text-scale 2.3 to it. Also subtitle font must be ready available in mplayer sub-folder or mencoder need to know where the subtitle font are.
mencoder sample.mpg -oac copy -ofps 24000/1001 -ovc lavc -lavcopts vcodec=mpeg4:vbitrate=1100:v4mv:mbd=2:trell:cmp=3:subcmp=3:autoaspect:vpass=1 -vf pullup,softskip,crop=720:352:0:62,hqdn3d=2:1:2 -subcc -subfont-text-scale 2.3 -o sample-cc.avi
Here are some samples I have encoded with mencoder using -subcc from mpg files that I have recorded with Hauppauge PVR-500 tuner cards.
Here one with the regular pop-on closed caption which is most commonly used by tv show and movies
http://www.stlaware.com/output-cc.aviAnd here one with scrolling closed caption mostly used by live news or some tv shows
http://www.stlaware.com/output-scrollcc.aviIt doesn't look like "CC" because I did not tell mecoder to format it with white text and black border background. I am just happy to see that CC are burn into the video and I can take my recorded show with me on the trips and enjoy it on any mpg player so I don't have to worry about finding a mpg player that to support it since it burnt into video and now an open caption.
I am not hoping that Handbrake developer would add this Burn CC to Video support into Handbrake because I use and love mencoder but I wanted to help developer out here by explaining and giving a starting direction where to learn more about this if Handbrake developer decided to one day in future to add support on Handbrake. And also to explain to the public why encoding analog CC into digital format is not an easy task like the subtitle is so they can stop jumping all over the developer and start to realize it a very tough program to code.
Bill