I doubt there's a game engine released in the last three decades that can't show text on the screen.
Pink Sweets doesn't only have subtitles during scripted moments, they also go off when you take damage, use a bomb, speed up/down, get a power-up, narrowly avoid an attack -- it's really not particularly different than a fighting game, actually. It also works when you're playing co-op, so two players isn't an issue either. It's a great example because it was never released outside of Japan so the translation is terrible (meaning very little effort was put into this), and like I mentioned the resolution is super low. So if Cave can make it work in that situation back in 2006 than Arc has no excuse a decade later.
More importantly it's like I said, BlazBlue only needs to subtitle important dialogue. You don't need to subtitle people yelling out their special moves, just the specific character to character dialogue about shitty rabbits and robotic sex innuendo, things like that. That stuff is
not going off "every other frame". There's no real reason Arc couldn't do this, at least as an option.
Pink Sweets actually
does subtitle every little dumb grunt and special move yell, which just shows how unobtrusively you can do something like this. This is a lousy recording (which I think helps my point),
but you can see some of it in action here. Most of the subtitles in that video are admittedly really short, but during the rare times longer lines are said it works just as well. (A problem with using a better recording is high level Pink Sweets play inherently leads to less dialogue because you're avoiding things like power-ups to manage rank.)
