Hi Casino1784,
This can be done any of the ways that you have stated and been told, but I have found the best way is both; sub domains and sub directories. The reason being the sub domains can be hosted in the target geographical region and will in all aspects be a stand-alone site in Google’s eyes; this means you can build links from your original index page and link juice and PR weight will flow immediately.
Sub domains are great for geographical targeting as well because you can register the sub domain in Google webmaster tools separately and set the geographical targeting to the appropriate region. These will always rank higher than language based sub directories.
I would then create my language-based sub directories (/fr/, /nl/, /be/ are fine) with a keyword/link in the native language on my front page. Google will pick up the sub domains and their respective languages automatically. It may not be immediately when they crawl and push it out in the index the first time, but it will be shortly after that. You will start to see rankings increase on multiple Google results. For instance I have a Spanish client ranking in Google .cl, .co.cr, .co.ve, .com.ar, .com.co and another 120+ Google engines. It all depend on end user preference settings when they search. They are ranking for both instances; es.website.com and website.com/es/.
Most foreign versions of Google search offers 3 options;
results from; the web, page in [language], pages from [accompanying geographic location]
As I mentioned, the sub domains hosted in the targeted geographical region, in the native language, and targeted in Google webmaster tools is first on my list. Building sub directories, proper link structure are next. Then I would create a new xml sitemap with the pages near the top and manually resubmit it. These sub directories will rank on Google.com if someone queries a language based search which is why I always do everything I have mentioned above.
Lastly, when your subdomains start ranking well and you get traffic and page rank (and a few links), you can feed this page rank and sculpt it through to any weak domains.
Its all in the little details.
Good Luck, Gary