Well, after reading what the valet mode does (disarms alarm but allows the keyless entry to work) it looks like I want to leave it as is, since without the remote working I have no way to turn off the alarm. But that brings it back to my original problem - why isn't the car responding to the reprogramming sequence?
The horn does sound once when I lock the doors using the power door lock, so I know the wiring/programming has to be in there...
I took it to the Subaru dealer and they were able to program the remotes correctly. Plus, they did it for free. Yay!