Jun, I do not understand the difference between "the nearest parent subsite" and "parent subsite" that seems to be the basis of your suggestion. Assuming foobars are subsites in the following tree:
foo.com/foobar1
foo.com/foobar2/foobar3
foo.com/foodir/subfoo
foo.com/foobar5
Do you mean that subfoo inherits from foobar2 or foobar5 instead of foo.com in this example? If so, what would the rule for selection be?
As an alternative (Lars, ignore if you've completed the changes) perhaps the subsite creation process could display a list of all available subsites, and the admin selects a subsite to be parent by clicking on the link? This would allow much flexibility in how subsites are organized in the directory tree.
