It's possible to an extent. For instance, you can copy the stream folder from the NTSC-J to the PAL or NTSC-U version and just replace it, and then launch the game.
This will put the game in Japanese with Japanese subtitles, the only gain here is that the Menus, Journal, and Move Scroll are in English. Since 1st_read.bin contains such data as the journal and moves scroll.
As for getting english subtitles, the srf files store them and they are in asf archive with the sound files. The problem of just replacing the subs or the audio files is that when you try to re-create an afs archive, the # of lines in the srf file must match up with the number of audio files. If it doesn't, you won't be able to create a valid idx file that validates the afs archive. Of course, you could manually modify these lines, but then you'd encounter unforeseen problems and probably many of them. The only true way would be to completely re-work it from the NTSC-J version but you could use the PAL NTSC-U versions as a guide by looking at the subtitles there.
http://www.hiei-tf.fr/shenmue1-howtotra ... glish.htmlBottom part discusses what I said.