who has the best solution for this tough site-restructuring challenge!

Hello everyone, I need to re-organize my site’s structure. At the moment, the posts are categorized under topics such as: Food, Sights, Art, etc.
My current permalink structure is /%year%/%category%/%postname%.
I would now like to begin organizing my posts by the above categories (sights, food, etc.) AS WELL AS by hierarchical “location” terms
-Italy
–Tuscany
—-Florence
—-Siena
–Sicily
—-Palermo
etc.
I want to give my 30+ contributors/authors “ownership” over location-specific sections of the site. (i.e. my writer in tuscany can write posts for the tuscany section…etc.). So,

CHALLENGE 1: How would you handle the new taxonomy situation? Custom taxonomy maybe? Or not and instead use conditional tags to call the various combinations of the above two taxonomies? Other ways I’m not even thinking about? Also, would you adjust permalink structure depending on your solution/would it even be possible? or leave it as is?

CHALLENGE 2: How would you set up a location based mutli-author site? Stay w/ a single-site install, and use something like “role scoper”? (Would this work with whatever solution you came up w in challenge 1?) Other? Or go with a multisite?

I cant’ wrap my head around this. For this reason I am asking you experts.

Btw, eventually I plan on offering other content types, (recipes, tours , etc.) , which must also be categorized according to “location”. (eg. …/italy/tuscany/tours/through-the-vineyards, etc.)

Any help, input, and advice, is truly appreciated.
Best rgds,
Geebs