creating a useable translation requires understanding of the source text. I understand that, but even if the translation is not completely coherent the human mind can generally pick out what is pertinent, targeting on only the important words, such as 'leather shirt', 'trade', 'sell', 'free', 'help...

How about an option which allows the user to set two options: their language and if they wish the chat to be translated. Translated chat would be slower, but could conceivably be rendered through someling like Babel Fish (http://babel.altavista.com/) by parsing the output page. In the game it could ...