So the closest example I can give is craigslist, for example:Craigslist Winnipeg: http://winnipeg.craigslist.ca/Craigslist Toronto: http://toronto.craigslist.ca/Is copying this style going to hurt me a lot SEO wise?  Does it make more sense to have cities setup as www.newproject.com/winnipeg/ or winnipeg.newproject.com
Should I use multiple subdomains for a website that supports multiple cities?
seo;subdomain
According to this article last year with Hubpages.com CEO, switching from directories to sub domains had the greatest affect on ranking positively after Google's panda algortihm update killed content farmshttp://www.zdnet.com/blog/foremski/hubpages-ceo-on-googles-panda-algorithm-seo-doesnt-work/1928You could always do a 301 perm redirect from www.newproject.com/winnipeg/towinnipeg.newproject.com to help with people rememberingBottom line: I would go with sub domains, but there is more configuration involved and you will have to make sure sessions are configured correctly to be able to move between the domains without needing to re-authenticate, etc..