DVD's contain 4 colored bitmaps for subtitles.
It does not matter if they are generated inside or outside the authoring package, and it should not matter to you.
Creating the TIFFS is a very fast process. If they charge you for that, they better not charge too much.
There are several packages that can do this, one being my Subbits, the other Spherico's TitleExchange with a PSD script.
But normally the most effort goes into creating the content.
And you have taken care of that. (although not the best way imho, but if it's just a few titles, well, why not.)
For cost: the most imporant thing is the figure right down on the quote.
IF you like that, don't think about it.
If you don't, why not hire a smaller company that uses DVD SP?
(And with current internet speeds, they can be anywhere around the globe)
I'm more than willing to give you a quote...
Bouke
http://www.videotoolshed.com/
smart tools for video pros