What name should I give that file in the source package?

foo-fr.texi sounds fine to me.

    What should be the names of the processed info files?

foo-fr.info.

    Where should the info files be installed?

As things stand, the most practical choice would be $(infodir)/foo-fr.info.

There has been discussion about having language subdirectories of
$(infodir) (fr, de, ... en?), but nothing has actually been implemented
for it.  

    Is there any way to make "info foo" do the right thing dependent on the
    locale settings?

Not that I know of.

You could do it by hand by installing in $(infodir)/fr/foo.info,
and then making a dir entry that referred to (fr/foo.info), I would think.
That might be a bit cleaner ...

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