Hi Manchari
I hope you are well and many thanks for using the SAP Discussion Forums 
.
In relation to the scenario that you have described you mentioned wanting to restrict the external users being displayed for Substitution in Internal Portal. You have setup the UME property and People Renderer Profile, Trusted Attributes settings as per the documentation.
Now in relation to the above could you kindly confirm that after making these changes did you perform the following:
- Clear the UWL Cache
- Restart the UWL Service
Now regarding the document you referenced this is the official way that we recommend customers to restrict the people picker. Unfortunately there really isn't another supported way to achieve this. We just read all users back from the UME/LDAP, etc. However, the solution in the blog was signed off by our development team as an achieveable way to restrict the people picker so long as KMC is running on the portal.
http://wiki.scn.sap.com/wiki/display/BPX/Enhancements+to+the+Universal+Worklist+People+Picker
In NW 7.01 the people picker functionality is provided by a KM component that supports company related functionality. In NW 7.30 UWL no longer uses KM PP. Instead it uses native PP that lacks company related features.
Kindly ensure the configurations as per the documentation are configured and setup correctly as the smallest discrepancy may be causing this undesired behaviour:
http://help.sap.com/saphelp_nw70ehp2/helpdata/en/4c/a4199ffd8b4b648ea84c6623ba09c5/frameset.htm
http://help.sap.com/saphelp_nw70ehp2/helpdata/en/83/8698f0f9514f299434bcce8fee4512/content.htm
Configuring I-View Properties
http://help.sap.com/saphelp_nw73/helpdata/en/4a/ee9c6588946d62e10000000a42189c/frameset.htm
Kindly update me as per your findings.
Kind Regards & All The Best
Troy Cronin - Enterprise Portal Support Engineer