We (ok, "I") had interpretted the rules the same as your group innitially. I think it was James who argued that the attacker and then the defender gets the opportunity to retreat after every battle and to be consistent that sequence should be true for submarine strategic attacks as well.
I could not really argue the point and, since it added to the survivability of subs without making any special rules, we incorporated it into how we conduct submraine strategic combat. We've been interpretting the sub rules this way for the last couple games we have played. Unless you guys object, I think I will make this interprettation more clearly stated in the rules.