Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/Maven2Plugin.java
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/Maven2Plugin.java	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/Maven2Plugin.java	(working copy)
@@ -455,16 +455,18 @@
   }
     
   private void extractSourceDirs( Set directories, List sourceRoots, File basedir, File projectBaseDir ) {
+    String relativedirpath = toRelativeAndFixSeparator( projectBaseDir, basedir.getAbsolutePath() );
     for( Iterator it = sourceRoots.iterator(); it.hasNext(); ) {
       String sourceRoot = ( String ) it.next();
 
       if( new File( sourceRoot ).isDirectory() ) {
-        directories.add( toRelativeAndFixSeparator( projectBaseDir, sourceRoot ) );
+        directories.add( relativedirpath + ":" + toRelativeAndFixSeparator( projectBaseDir, sourceRoot ) );
       }
     }
   }
 
   private void extractResourceDirs( Set directories, List resources, File basedir, File projectBaseDir ) {
+    String relativedirpath = toRelativeAndFixSeparator( projectBaseDir, basedir.getAbsolutePath() );
     for( Iterator it = resources.iterator(); it.hasNext(); ) {
       Resource resource = ( Resource ) it.next();
 
@@ -474,7 +476,7 @@
         continue;
       }
 
-      directories.add( toRelativeAndFixSeparator( projectBaseDir, resource.getDirectory() ) );
+      directories.add( relativedirpath + ":" + toRelativeAndFixSeparator( projectBaseDir, resource.getDirectory() ) );
     }
   }
 
Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/actions/UpdateSourcesAction.java
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/actions/UpdateSourcesAction.java	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/actions/UpdateSourcesAction.java	(working copy)
@@ -10,6 +10,7 @@
 import org.eclipse.core.resources.IProject;
 import org.eclipse.core.resources.IResource;
 import org.eclipse.core.runtime.IAdaptable;
+import org.eclipse.core.runtime.IPath;
 import org.eclipse.core.runtime.IProgressMonitor;
 import org.eclipse.core.runtime.IStatus;
 import org.eclipse.core.runtime.Status;
@@ -19,11 +20,13 @@
 import org.eclipse.jdt.core.JavaCore;
 import org.eclipse.jdt.core.JavaModelException;
 import org.eclipse.jface.action.IAction;
+import org.eclipse.jface.preference.IPreferenceStore;
 import org.eclipse.jface.viewers.ISelection;
 import org.eclipse.jface.viewers.IStructuredSelection;
 import org.eclipse.ui.IObjectActionDelegate;
 import org.eclipse.ui.IWorkbenchPart;
 import org.maven.ide.eclipse.Maven2Plugin;
+import org.maven.ide.eclipse.preferences.Maven2PreferenceConstants;
 
 
 public class UpdateSourcesAction implements IObjectActionDelegate {
@@ -93,14 +96,33 @@
     }  
     
     private void updateProject( Set sources, IProject project2, IProgressMonitor monitor ) throws JavaModelException {
+      IPreferenceStore preferenceStore = Maven2Plugin.getDefault().getPreferenceStore();
+      boolean separate = Boolean.valueOf(preferenceStore.getString(Maven2PreferenceConstants.P_SEPARATE_OUTPUT_FOLDERS)).booleanValue();
+
+      IJavaProject javaProject = JavaCore.create(project);
+      String defaultOutput = javaProject.getOutputLocation().toPortableString();
+      int slash = defaultOutput.indexOf('/', 1);
+      if (slash>=0) {
+        defaultOutput = defaultOutput.substring(slash+1);
+      } else {
+        defaultOutput = "";
+      }
+
       ArrayList sourceEntries = new ArrayList();
       for( Iterator it = sources.iterator(); it.hasNext(); ) {
-        String name = ( String ) it.next();
+        String fullname = ( String ) it.next();
+        int colon = fullname.indexOf(':');
+        String relativedir = fullname.substring(0, colon);
+        String name = fullname.substring(colon+1);
         IResource resource = project.findMember(name);
-        sourceEntries.add(JavaCore.newSourceEntry( resource.getFullPath() /*, new IPath[] { new Path( "**"+"/.svn/"+"**")} */));
+        if (!separate) {
+          sourceEntries.add(JavaCore.newSourceEntry( resource.getFullPath() /*, new IPath[] { new Path( "**"+"/.svn/"+"**")} */));
+        } else {
+          IResource output = project.getFolder(relativedir + "/" + defaultOutput);
+          sourceEntries.add(JavaCore.newSourceEntry( resource.getFullPath(), new IPath[0], output.getFullPath()));
+        }
       }
       
-      IJavaProject javaProject = JavaCore.create(project);
       IClasspathEntry[] currentClasspath = javaProject.getRawClasspath();
       for( int i = 0; i < currentClasspath.length; i++ ) {
         if( currentClasspath[i].getEntryKind()!=IClasspathEntry.CPE_SOURCE) {
Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferenceConstants.java
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferenceConstants.java	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferenceConstants.java	(working copy)
@@ -32,5 +32,7 @@
   /** boolean */
   public static final String P_DEBUG_OUTPUT = PREFIX+"debugOutput";
 
+  /** boolean */
+  public static final String P_SEPARATE_OUTPUT_FOLDERS = PREFIX+"separateOutputFolders"; 
 }
 
Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferencePage.java
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferencePage.java	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferencePage.java	(working copy)
@@ -86,6 +86,10 @@
         Messages.getString("preferences.debugOutput"), //$NON-NLS-1$
         getFieldEditorParent()));
 
+    addField( new BooleanFieldEditor( Maven2PreferenceConstants.P_SEPARATE_OUTPUT_FOLDERS, 
+        Messages.getString("preferences.separateOutputFolders"), //$NON-NLS-1$
+        getFieldEditorParent()));
+
   }
 
   /*
Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferenceInitializer.java
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferenceInitializer.java	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/preferences/Maven2PreferenceInitializer.java	(working copy)
@@ -35,6 +35,7 @@
     store.setDefault( Maven2PreferenceConstants.P_PLUGIN_UPDATE_OVERRIDE, false);
     store.setDefault( Maven2PreferenceConstants.P_USE_PLUGIN_REGISTRY, true);
     
+    store.setDefault( Maven2PreferenceConstants.P_SEPARATE_OUTPUT_FOLDERS, false);
 //    MavenEmbedder embedder = plugin.getMavenEmbedder();
 //    File localRepository = embedder.getLocalRepositoryDirectory();
 //    if(localRepository!=null) {
Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/messages.properties
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/messages.properties	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/messages.properties	(working copy)
@@ -44,3 +44,4 @@
 preferences.policyInterval=interval
 preferences.policyNever=never
 preferences.debugOutput=&Debug Output
+preferences.separateOutputFolders=&Separate Output Folders
Index: C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/launch/Maven2LaunchDelegate.java
===================================================================
--- C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/launch/Maven2LaunchDelegate.java	(revision 5)
+++ C:/eclipse/workspace/org.maven.ide.eclipse/src/org/maven/ide/eclipse/launch/Maven2LaunchDelegate.java	(working copy)
@@ -183,6 +183,9 @@
 
     b = preferenceStore.getBoolean(Maven2PreferenceConstants.P_DEBUG_OUTPUT);
     sb.append(D).append(Maven2PreferenceConstants.P_DEBUG_OUTPUT).append("=").append(b);
+
+    b = preferenceStore.getBoolean(Maven2PreferenceConstants.P_SEPARATE_OUTPUT_FOLDERS);
+    sb.append(D).append(Maven2PreferenceConstants.P_SEPARATE_OUTPUT_FOLDERS).append("=").append(b);
     
     return sb.toString();
   }