I have been fighting with this for more than a year. Basically, it is a wonderful dream … but it does not work.
If you look at the way WP handle themselves … they just use separate installs on separate domains and, considering that the search function on MU sites is fairly sucky anyway, this is not great loss. A lot of additional admin time but not lose in the end.
It is weird … but for a software all about “communication” there is very little cross linguistic communication, awareness and, especially, the ordering of available software. It is strangely nationalistic or “Speak English Please!”.
You will also have LOTS of problems with themes IF you are using non-Roman characters, e.g. Chinese characters.
Examples,
If … and big IF only … foreign language software exists … it does not exist on English language website. You wont even be able to find it half the time.
If … and big IF again … you get something running … you will find that
a) there are many strings that are not translated
b) most of the themes and all of the plugins have hidden strings that need translating
c) where you translate manually … these will NOT be translated by non-core non-Automattic language translating plugins
d) there is a good chance language translating plugins will not be supported and updated. We lost j-language recently which was a good and simple one.
Ditto, WPML and its Buddypress chum, which is one of your best bets to look at, does not always work but there is an “Admin in English” plug in.
Additionally, .mo or .po files alone do NOT do the job alone
What you need to realise is that you are headed into mostly uncharted waters and the bleeding edge of Web 2.0. You will need VERY good techie support in whatever languages you are attempting to handle bespoke translations. And even then it will not “just work”. You will have to make compromises.
? Something needs to change with the way WP handles languages … up to now it just has not been considered or prioritised in the design.
IMHO, basically ALL of the text has to be moved to separate files where they can be edited rather like phpBB handles language and language packs. And to be editable via the admin interface.