Hi,
the fact that your regional websites are folders makes no difference - don't get side tracked by all the noise you hear about mutlilingual issues - I rank top on a .name bolg for very competitive terms on regional and .com search engines with my bilingual blog.
Now having said that, the first thing you want to do is run a competitive analysis and benchmark yourself against those sites you identify as competitors and only then begin to evaluate your options w.r.t. possible improvements on architecture or other multilingual issues (for example regional hosting with redional TLDs) to achieve top rankings - all this might not be necessary - never shoot a butterfly with a cannon ...
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