subtitle track turns monitor window into color noise?!

As soon as I added a subtitle track to my encore 1.5 project, the monitor window
turns into colored noise.
 <http://www.smugmug.com/gallery/4373720_VBrbJ/>
The video noise seems to be an upside down image (of a performer on stage).

If I play the video, it turns normal, but the audio track sometimes play normal,
sometimes it becomes a constant sine wave.

A work around is to remove the transcode. However, as I add more subtitle into
the track, I run into a "out of memory" pop up. Subsequently, the
cursor (red line) redraw leaves behind some un-erased lines, and the bottom
border of the subtitle track sometimes is not drawn. Drag-resizing the subtitle
also does not redraw until the mouse is released.

If I build the DVD, some of the subtitles show up at the wrong time. An earlier
project with fewer subtitles works fine -- before I see the "out of
memory" error.

Searching "encore subtitle out of memory" produces some hit with
google but no solution can be found.