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i18n_hreflang module provides its own implementation of the said hook, but only for the front page.
Simply reuse the code from the i18n_hreflang module and add an if clause to limit the translation to node paths only (the ones the code it most likely to work correctly). url() function seems to be handling these without any issues.
Further review & testing is required to determine whether it work properly for all node paths (the code has so far been tested on both aliased and unaliased paths on a local dev site).
The code could also be expanded to enable entity path translation.
FAILED: [[SimpleTest]]: [MySQL] Unable to apply patch 0001-Remaking-patch.patch. Unable to apply patch. See the log in the details link for more information. View
FAILED: [[SimpleTest]]: [MySQL] Unable to apply patch 0001-Add-hook_i18n_translate_path-for-Entity-Translation-.patch. Unable to apply patch. See the log in the details link for more information. View