Hi,
Looks like there are two important issues to help out with to improve translation support in Drupal 7:
1. Drupal should not require .po file rename in installation - which tries to solve this problem that many people experienced that Drupal now requires .po files downloaded to be renamed to use for installation. Confusing for many people. Has a nice patch: http://drupal.org/node/994500#comment-3874206 Please review, test and dissect :)
2. Drupal cannot be installed in a non-predefined language - can be easily reproduced due to the above bug, but even if that resolved can still be an issue (although much more minor). I think this will need a bit more discussion, but the patch presented is IMHO not a good direction as of now: http://drupal.org/node/1007488#comment-3874184
Given the imminent release of Drupal 7, we should really get together and get these resolved if we'd like to see an easy to install localized Drupal 7 out of the box :)
Thanks, Gábor