Not all of the steps I listed are in Moodledocs but some of them were. Other information is in the translation section of Moodledocs
. I know that this is a little complicated but you can do it - you are almost there I am sure!
Actually answering your questions has helped me to learn more about the changes in 1.6 regarding languages - I wasn't on top of all the details until now.
On a fresh install, there are no folders in moodledata/lang because you have not added any other languages there yet. If after installation you use the language import utility to add other languages (eg Japanese, French etc.), then they will be downloaded to moodledata/lang and it will no longer be empty. If you have en_us_utf8 in your Moodle you must have added it there, either manually or using the language import utility in Adminstration --> Configuration --> Languages.
/lang/en, both en and en_utf8 go into moodle/lang, while all others go in moodledata/lang), but it is only for sites not using unicode - which will be uncommon as unicode is the default for Moodle 1.6. From the Readme in moodledata/lang/en: "This language pack "en" is a *stub* language pack for backward compatibility with old sites not using Unicode. It simply makes the en_utf8 pack appear under the old latin encoding. Do NOT add new strings or help files here, please use en_utf8 for all new strings.
" So it is not used for most sites.
Yes, I should have said to name your customized language pack en_utf8_local
). If you use this name format then it is checked automatically before the corresponding default language. Don't forget to copy the langconfig.php file from the en_utf8 pack to the en_utf8_local pack you are creating (but you don't need to add the parent language string, both because en_utf8 is the global default and also because the "local" name is checked together with the corresponding language - unless you want the parent language to be en_us_utf8
From the translation page (the same link as above): "It [the local pack en_utf8_local] will not appear in the language menus for selection and your users do not need to change their settings
." So the reason you are not seeing the customized language pack in the menu is because you are not supposed to!
The local pack en_utf8_local and the main pack en_utf8 are checked together (local one first, then the main one) and the language menu only shows one entry for both of them.
Hope all this helps - it has me!