Is this going to address this bug?
Topic on Talk:Requests for comment/New sites system
However. If we add a good UI and sync things properly. It may not be an issue anymore.
At the least adding local prefixes someplace like meta won't be as disliked and can be used to pretty much address that issue.
Local interwikis are a horrible idea and I don't see how it could be relevant: the use cases were all of global use, adding more interwikis for that stuff is easy and not disliked at all but requires to learn many codes.
Not local to the wiki. Local to a central wiki. The request basically wanted an interwiki with interwiki links inside that. If you add forwarding interwikis to a central place like Meta (something easier with a nice ui that makes people not care about it not being dynamic) then you can get the same result by using Meta as that central interwiki.