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 ...