this was a bit of a bitch to get working so thought i'd post what i did to get this working in the end:

I used the nestedurls build and changed in SiteTree.php

      // Keep it clean
      } else if(isset($this->changed['URLSegment']) && $this->changed['URLSegment']) {
         $segment = ereg_replace('[^A-Za-z0-9]+','-',$this->URLSegment);

         $segment = ereg_replace('-+','-',$segment);

to

      // Keep it clean
      } else if(isset($this->changed['URLSegment']) && $this->changed['URLSegment']) {
         $segment = ereg_replace('[^A-Za-z0-9]+','-',$this->URLSegment);

         $segment = ereg_replace('-+','-',$segment);
//hack
$segment= str_replace("-htm",".htm", $segment);

also to get rid of trailing slashes:
   public function Link($action = null) {
$linkwithslash = Controller::join_links(Director::baseURL(), $this->RelativeLink($action));
if ('/' == substr($linkwithslash, strlen($linkwithslash)-1)) $linkwithslash = substr_replace($linkwithslash, '', strlen($linkwithslash)-1); // strip trailing slash

return $linkwithslash;   
//   return Controller::join_links(Director::baseURL(), $this->RelativeLink($action));
   }
   

Clearly there is a reason why the developers have chosen not to have this in by default (security?) so I'll have a look to see if I can tidy this up and post back later.
This trick could also be used to allow foreign letters in rusl etc.