Jeff : yes you can do testsite1/testsite2 for portal 1.  That's exactly what a 'child portal' is.

All you need to do to create a portal like this is to select the 'child portal' option when creating a new portal.  This gives you the place to enter the alias, and provides the 'parent' part of the alias for you.

If you've already created the portals, it becomes a bit more difficult.  You need to create the directory in the parent portal that matches the child portal alias, and then copy in the special default.aspx file that child portals use.