I'm a Canadian living in Mumbai.... Been in India about 3 years, Mumbai for about one of those.... in and out of Mumbai throughout.
The International Airport and Domestic airport are in the same local... the only problem is when you leave the International Airport you have to go around to the opposite end to the domestic terminal.... and depending on the time of day... travel time could be as little as 15 minutes... to 1 hr.... not usually longer.
I'm not sure about the connecting/luggage business... but I've been on several flights in to Mumbai then straight on to the domestic for work....
When swine flu hit it took me nearly 2 1/2 hours to get out of the intl airport because of the unorganized chaos.... failing some epidemic or wierd cicumstances... plan 1.5 hr max to exit/claim baggage from Intl airport.... 1hr max for travel... and 1.5 hr max for domestic leg.... in total.... your buffer should be at least 4 hrs to be safe.