Ok here's how I got it setup:
Firstly, I don't use the Program Files folder.
I got all my games in C:\GAMEZ
So I start off with installing SF2, SF2V, etc. in proper order to get a full merged Jan2011 game.
These go in C:\GAMEZ\Strke Fighters 2
Be carefull you must have the older patched setup files from TW. Not the newly packaged May2011 installation files.
Then I rename C:\GAMEZ\Strike Fighters 2 to something like SF2.Jan2011.
This will be our Jan2011 patched core game folder.
NEXT, I start from scracth and install the games from May2011 setup files.
Again these will be installed in C:\GAMEZ\Strike Fighters 2
And this will be our May2011 patched core game folder.
Now here how I deal with the Mod Folders.
I put my various mod folders in C:\GAMEZ\SF2MODS
Then start replicating and installing various full mods under this. (Example: C:\GAMEZ\SF2MODS\Falklands)
Mdify the respective options.ini files inside my sf2mods to point here, and it all works good.
Only catch is, If I run a MOD using a Jan2011 patched game exe, then return and run a MOD from May2011 exe, some of the MOD files might be overwrriten by the game.
The game for some reason, goes out and extracts the stock aircraft.ini files on top of your MOD folder..
There's a workaround, by renaming your MOD folder once, after a switch from running the different Patched Core gane file.
In summary, it's not easy to setup and maintain. But it's possible.
I don't enjoy it, unfortunately the latest patch has pushed me to keep them like this for a while..