[Plugin: WP_Multilingual] Theme localization does not work as described

I have installed this great product and already prepared some posts in two languages. The only problem I get is to make the theme get translated when the languages switch. Here are my observations:
– if I copy .mo file into the wp-includes/languages folder, nothing happens. This is a place for WP admin localization, IMHO;
– if I copy .mo file into the wp-content/themes/mytheme folder, it seems to be working, but only with an English translation (my default language is set to LT);
– in any case I am not able to get the language switch back from English into original (lt_LT).
I believe that everything was done following the short instructions on the authors/product page, but maybe anyone has got an idea, what could be wrong here with these .mo or .po files? I have tried to combine this plugin with another one, to make translation more flexible – codestyling localization. But the problem remains the same, I cannot make it switchable, as the theme shows only translation which was made in English (not original Lithuanian).