Actually that's all you have to do. It should work even without
Configure::write('Config.language', 'nl'); - CakePhp will try to
autodetect your language, so it's best not to set it, unless you want
your page in one language only.
It works seamlesly in my language (slovenian).
Try changing your "nl" folder to "nld" (as per ISO 639-3 spec which is
used in cakephp):
app\plugins\lil_blogs\locale\nld\LC_MESSAGES\lil_blogs.po
If this works, please do send me your translation and I'll include it
in LilBlogs repository.
Cheers.