Well David (may I call you David?), I think in Spanish all the time and I'm never translating (only if I'm not sure about the structure of something, or if I'm not sure about a word, but I analyze it in Spanish). I don't know if you're familiar with the AJATT technique (
http://www.alljapaneseallthetime.com/blog) but that guy became near-native within 1.5 year (now he IS native-like). So it's possible, really, it all depends on the way you approach the language.
About living in the country; why would you? Sure, if you can afford it, do so. But with the internet and DVD's you can make your own environment. I've done it with Spanish; I have tons of series dubbed in Spanish and original series. I don't have Spanish TV, but I make my own TV guide (well, I don't make one, but I just choose from what I have and watch it). It just takes some money (or just make copies - which is actually legal in the Netherlands, don't know if you can make home copies in the US) and time to collect native materials. But if you want to become native-like you have to use stuff that natives use. And that's something you can use everywhere, in your own country or in Spain.