Multiple-Language: Configuration options?

I am planning a dual-language (EN and a second language) website. I will have to prepare two versions of the same content for each post I write, since translating engines are nowhere near capable of the task. I have setup categories as my menu items and my permalinks are hence:
mydomain/%category%/%post-name%.

The best way to solve the dual-language setup AFAIK, is to have the two-letter language code placed somewhere into permalinks – for English, as an example:
mydomain/%category%/EN/%post-name%
Finally, placing an http link in each post for the translated version is a trivial issue.

I’d like to hear from those who have already done something similar, or those experienced in (for lack of a better term) “mirrored content”. What options are there and what do you suggest?

P.S. I’m running a multisite setup btw, but using a sub-domain for each language would be detrimental to traffic stats and the resulting ad-revenue, IMHO.