That sounds similar to the approach I've been using, as definitely not a fan on the media queries approach - what a waste of bandwidth when you send HTML/CSS across that doesn't get used.
As I've extended mobile sites on top of existing full site I've gone with just a "mobile" folder within the main templates folder though, rather than splitting everything into two. And then yeah, it does logic based on which domain you access from as to which template files to pull in.

Although on top if that I am doing a redirect from www.example.com to m.example.com based on the user agent. But there's a link back from the mobile site to the full one so you can still see the full site if you prefer, it just has to set a cookie so it knows not to redirect you back again!

I had originally been using the auto-redirect method, as well, but came across a site with a method that I much preferred. The first time you view the website, rather than auto-redirect, it simply displays a landing-page of sorts with two buttons... "Mobile Site" or "Desktop Site" ...with an option to remember the decision indefinitely (as opposed to asking at the start of each session).

The mobile site then has a link within the navigation menu to switch to the desktop version at any time (which when clicked pops up a confirm dialog asking whether or not to remember the decision to switch), while the desktop site places a link at the bottom of the page to switch to the mobile version (again, with a confirm dialog).

That sounds quite good. Unfortunately the only sites I've seen use that method have never worked properly. They do things like show the landing page and when you click either link send you to the home page - rather than the content you were after. Might try to do something like that on the next mobile site I do :-)