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Thank you.

There was a really good Whiteboard Friday on this topic. http://www.seomoz.org/blog/international-seo-where-to-host-and-how-to-target-whiteboard-friday Rand discusses the tradeoff of the approaches you mention above.  Be sure to also read the comments.  Some commenters mentioned they had really good results using  geotargeting in Google Webmaster Tools.