Okay so I tried with one of the anime episodes. Its a little weird, but It did work somewhat.
On the first attempt, I wanted to see if I could get both audio (Japanese audio, English audio, and the English subtitles) into the episode, and have it work in iTunes with the option to chose either audio, and on/off the subtitles. (I've done subtitles before, so thats easy (click on subtitles, add external .srt) simple.
Right, so when you first Source the movie, these are the defaults that handbreak will show. (Note: 0: Unknown (AAC) 2.0 Channel is the Japanese Audio only.
We want to have both options of Japanese Audio, and English Audio. So I followed how handbreak defaulted the Japanese Audio codecs
When Handbreak finished, I threw the movie into iTunes with quite an odd result. It does work, You have the option to have the Japanese Audio, OR the English audio, but the option to chose these is the Speech bubble where normally the option to turn subtitles on/off is. The Subtitles don't show because there is no option to toggle them.
hmm... ?
Tried a different approach:
Using Handbrake, find the source, added the anime.mkv in. Clicked on "Universal Preset" and then went to Audio. (Now keeping in mind, This anime, has Japanese Audio, Option to chose English audio, and option to have English subtitles) when playing in Divx or VLC. (Now... because the series was remastered, the Japanese Audio is extremely low volume, and the English audio is normal volume, (and this is one of the few anime where the english audio/dialogue was great. So we'll just settle to have English audio only.
So I assume this way is correct:
Because the English Audio is a second option (in divx) I assume it has to be the 1: Unknown (AAC) (2.0)channel). So I removed the Japanese one (which is 0: Unknown AAC (2.0)channel) and set the English channel audio codec as the core audio. upped the bitrate to 224.
Hopefully this should work as I intend. (which is to have English as the only audio).