Thanks much Yuvi. Great work. Looking forward for more hacks. I would post about this in Wikitech list and ask for suggestions / using the extension across Indic / non latin wikimedia projects. Probably we can rename as TidyURL since its not really short and short is not we care about,tidy is important(its a nice to have). Some more support for using the extension on all projects will do good in seeing this in real :)
Short Update.
As requested by Srikanth, I've implemented the user configurable "URL
Prefix" so any domain with proper forwarding can be used. I've also
added a link by default to Toolbox. Will add base64 encoding soon.
The Extension is live at http://wiki.busroutes.in. Example 'short' url
is http://wiki.busroutes.in/wiki/Special:ShortUrl/18q. We could
implement mod_rewrite rule and get it much shorter.
Is there interest in getting this out to tawiki? We could have URLs
like, http://ta.wikipedia.org/r/1d2 or similiar.