There is no "best". It depends on your needs, your desires, your skills and your equipment.

For some people KMplayer, the front-end to mplayer for the command line works fine to display subtitles, for me it never did. For some people the unfinished version of VLC was good enough and there are plenty of cases where the stock media player does a fine job.

For most use cases it's simply a matter of preference. Only when you need more specific functionality, the non viable options weed itself out by lacking that functionality.

I use mplayer for command line a lot too on full blown desktops like netbooks. Kubuntu for Acer's eee netbooks, for instance, doesn't play well with the TV-out. With the command line it turns out to work just fine by altering the output channel for the video and directing it to the TV.

Specific: When we're talking about .mkv files, or flv's, or the need to alter the screen or audio output, my advice would be the command line version of mplayer, as the most versatile of all.

Lastly, some mplayer links:

Download page here:
http://maemo.org/downloads/product/Maemo5/mplayer/
Of course you can download it through your application manager, or it install it from command line, as root with the following two commands:
Find the manual here:
http://www.mplayerhq.hu/DOCS/man/en/mplayer.1.html

Wiki here:
http://en.wikipedia.org/wiki/MPlayer