Use lots of cue points. You can use the 5 'normal' cue points, or the temporary cue point. The normal cue points will stay in the track, and be there next time you load the track. The temporary cue point is set to the beginning by default, and will be cleared when you unload the track.
For this explanation I'll presume that we're working with the left deck. Click the ? for a list of all the keyboard shortcuts, for both decks.
Before you start, you probably want to adjust the breaking in the setup screen. All the way to the left is probably the best place to star; instant stop.
W will start playing forward. You should look for a point to cue from. Q will play backwards if you overshoot that point, and remember you can scrub with the mouse to get right onto the point you want to cue from. Set a cue point - use ctrl-, to set a normal cue point, or alt-i to set the temp cue point.
Now drop the track in on the other track using W. Chances are the BPMs will be different, so adjust the pitch with the large pitch slider, or press E to pitch it down, or R to pitch it up. Note that the pitch change will be slight at first, but the longer you hold down the keys, the faster the pitch slider will move. Personally, I find it easiest to do everything from the keyboard.
Press I to jump back to the cue point (if it's the temp cue point, if not use the number keys). Try it again, soon you'll have the pitch about right. You might like to use the tempo matching display to get it right quickly.
Drop the new track again, and this time use the T and Y keys to bend the pitch to keep the two lined up. The beatmatching view will be very handy here. If you find that you are constantly bending it down, press E to make a pitch change down, and vice versa. I find that I can normally drop it a couple of times, and then with a combination of tapping the bend keys, with an occasional pitch adjustment, I can get the mix tight pretty quickly.
This is mostly theoretical, as I haven't mixed in internal mode a huge amount. I'd appreciate it if people with experience with DJ style CD players, or better yet, people who have used Scratch LIVE in Internal mode a lot could add to this thread. It would be good to get a nice concise tutorial on mixing in internal mode to add to the next user manual.