The correct way to typeset mixed English-Chinese text is to typeset the English text rotated 90 degrees clockwise, like this:
Note that the English text follows normal English typesetting rules.
Unfortunately, it seems that while modern word processors have at least nominal support for this, they don’t always work (e.g., OpenOffice.org would typeset the English part in the wrong font). Worse, the “professional” typesetting programs (except those that are actually made in C, J, or K, such as the ones made by Founder) do not seem to even support this.
Adobe Illustrator supports a Japanese typographic rule called “tate-chū-yoko” (縦中横, meaning “horizontal [text] within vertical [text]”). While this way of typesetting English text is also sometimes used in Chinese typesetting, it is not the normal way, especially when you are typesetting long pieces of prose.
(Actually I don’t think this is the normal way even in Japan, because this is not the way Japanese-made word processors work; they in fact produce the same kind of layout as the kind I described earlier as normal for Chinese.)
Tate-chu-yoko looks like this:
This is obviously not the desired result.
Various combinations of rotating the English and CJK characters, and rotating the whole block of text itself, would also seem promising. In Adobe Illustrator, however, none of these combinatons seem to be able to produce the desired results:
It might be worth mentioning that in older-style word processors, such mixed texts are handled by the equivalent of rotating the CJK characters, then rotating the whole text block (i.e., example 2 above). Because of this, it sounds very strange that Illustrator cannot reproduce the expected result.