Missing out on local search

My site is hosted in another country

[DontHurtMe]

My site is hosted in another country (US) and i am sure I am missing out on a lot of local search mainly from the three top search engines. Can somebody give me some advice on the correct procedure. I have an idea but am not positive.

1. have another domain name for my local country:
mysite.com.au (new), as well as mysite.com (existing)

2. have mysite.com.au hosted in australia so the ip address is in au.

3. Make a copy of my homepage and point it to my other existing domain, mysite.com

4. have a do now follow on this site for the search engines.

I hope this isn't to confusing but how does my site be indexed if there is a do not follow.

[DontHurtMe]

Problem solved. This may help someone else if they have a similar case.
I purchased my local domain. (au)
Then I had my domain registar or who I bought it from, to do url forwarding (redirect) to my original domain (com), with the new domain name always in the browser.
With only one website.
This way hopefully G should not penalize me for duplicate sites and msn and Y pick up my local search traffic.
So I found out that these things could affect whether your site is located in local search:

location of hosted IP address (G)
domain name extension eg. .AU , .nz , .ca (msn, Y)
Location of owner of domain, but this did not work for me.