URL aliases not used for other languages than the default

I have two languages, swedish (default) and english.
Navigating the homepage in the default language works fine but as soon as i select english from the switch language block every link in my menu (primary links) leads to it's system node address instead of it's URL alias address.

Example:

1. I type my homepage address in the address bar: www.mysite.com
2. I select the swedish "about us" page: www.mysite.com/om-oss
3. I select english and instead of brining me to www.mysite.com/en/about-us I'm presented with "www.mysite.com/en/node/23" which is the system address for about us.

Why is this happening?

I'm using these modules: i18n, pathauto

My settings for "admin/settings/language/configure":
= Path prefix with language fallback.

My settings for "admin/settings/language/i18n":
= All content. No language conditions apply."

I've removed the path prefix for the default language to avoid duplicated content issues (SEO). Typing "www.mysite.com/om-oss" or "www.mysite.com/sv/om-oss" shouldn't return the same result.

Note: My URL aliases work if I type them manually in the address bar. My problem is that the URL alias are not used when navigating the homepage normally.