Yeah, you have gone the way I am thinking? Two wires to whatever needs to be controlled, and also two seperate wires to a switch that tells the Arduino to toggle the light/appliance on and off?
Did you use phone wire for this wireing? It has 4 pairs, if I remember correctly.. Also, how did you do this in a manner that looks (lacking a better word) pretty? =P
I kinda started thinking about making some sort of relay flip-flop to control the light. If the circut gets a pulse from the Arduino, it toggles on/off, but it can also be toggled on/off using the regular light switch. Thing is, I want to be able to switch the lights on and off even if (by some odd chance) the Arduino should stop doing it's job.
For this, there is the old cross-switch cabeling. Not sure if that's the correct english term, but it's basically where you have two switches to control one light. It doesn't matter which switch you flip (or what position the switch is in), the light will go from on to off, or from off to on either way. But alás, that plan has the very weak point of not supplying the Arduino with info on wether the light is on or off. =/