The portfolio taxonomy should not be hierarchical.  Please, if you're reading this, don't ask me to change my mind.  I see portfolios as single, self-contained entities that are unrelated to any other portfolio.  If you want something hierarchical, you probably need to add a "category" taxonomy or something of the sort.  It's definitely doable with a few lines of code.
No need for strings related to parent portfolios.
Use '%portfolio%' in the default portfolio item permalink.  Also, I added in support for Breadcrumb Trail, which, with a little hacking, will support this permalink structure.