What do you mean by "internal links?" Do you mean links that you have added in Drupal's menu system? Or do you mean links that you have added via HTML in node bodies?
In the case of the former, these should be fine assuming they were entered as paths relative to the web root. In the case of the latter, you might investigate using something like
http://drupal.org/project/pathologic
Assuming you are using Apache I'd advise against using subdirectories when building sites and instead leverage virtual hosts so that the URLs don't cause these problems in the future
http://httpd.apache.org/docs/2.2/vhosts/
Carl WiedemannWebsite design & development consulting