This is WAY overkill, but I wanted to make my switches modular.
So, here's how this will work...
My EtherTen (yeah, not gonna use the ESP in the background) will use i2C to control a PCF8574 on each "light switch". I'm going to make it so that for each "gang" required at each position will be replaced with my switch. Since the PCF8574 can be daisy chained, I'm using dip switches to set the address for each PCF8574. For a four gang switch, I'll use four separate PCF8574's so that I can address them Individually. (If there is an IC that would let me use 4 bits or even 2 bits, I'd love to know more about it). One tactile switch for on and one for off. I'll use the same LED illuminated tactile switches that keiranwyllie & Jon Oxer are using for their light switches.
As I replace each light switch in my house, where for the most part, I have mostly "two-ganged" light switches, up to "four-ganged"... I will daisy chain off of each individual Arduino controlled light switch. I'm going to use 6 conductor IDC headers and cables with the shortest cables between each individual gang switch. (As well as from the Arduino to the first light switch.