That is an option, however, search would not show those same urls. If you wanted to actually do host header site collections, this would ensure that you have the URLs that are friendly in the search results, and would allow the end user to search using that part of the URL as well. However, there are some disadvantages to the host header URLs as well. You have to add them to IIS, you cannot use Alternate Access Mapping with it, and you have to manually add the start address to the content source to be crawled in teh default SharePoint Sites. You also have to be concerned if you are using Vanity urls with external sites as you can have either www.sitename.com or sitename.com and not both. Then you will have to create a redirect to the other one if you choose to do that.
Another option is to use IIS and create the redirects to the internal site or site collection manually. However, if there are potentially hundreds of these, then you will want to minimize this as well, because it can become very painful to manage, and when you have multiple web front ends, you end up with even more pain! And once again, search will only show the actual internal URLs.
My personal recommendation is to try to talk people out of vanity URLs as much as possible. If there is a need for a separate URL, then you should really explore why and see if it really should be another web application alltogether. I've worked with Vanity URL's and have several blog posts about configuring them, creating search with them, and also dealing with public facing ones. You can see those at http://pointgowin.com/seethepoint if you like.