I wasn't able to download a video directly with Youtube's closed caption, but I could do something better. I downloaded the video and the SRT. And I can play the video with the subtitles offline.
Here are the steps:
1- Use DVDVideoSoft Studio Free to download the youtube video (careful with Ads & toolbars... ) . I downloaded as MP4.
2- Use google2srt to generated the SRT from the youtube video. (It may require the Java Runtime)
3- For Windows 7, download the K-Lite Codec Pack. I accepted some 'well known' codecs.
4- As the experts tell us, name the .srt file generated the same as the .mp4, and put them in the same directory.
5- Play the MP4 file with Windows Media Player.