[Gamester17]

I know that .smi subtitle is supported in xbmc for xbox.

Yes but like I posted in the topic-thread that I linked to:

MPlayer has not yet been ported to the XBMC Linux port (nor to XBMC for Mac OS X, nor to XBMC for Windows)

...and you see it is MPlayer that supports SMI subtitles on XBMC for Xbox (not the DVDPlayer), and since XBMC for Windows do not feature MPlayer but only features the DVDPlayer it does not have support for SMI subtitles. Thus you are not doing anything wrong, you simply have to wait until somone either ports MPlayer to work under XBMC for Windows or more likely; someone adds SMI subtitle support to the DVDPlayer. For more infromation see:
http://xboxmediacenter.com/wiki/?title=DVDPlayer
and
http://xboxmediacenter.com/wiki/?title=MPlayer