More at: http://www.tolearnenglish.com/free/news/0gdirect.htm
How would you convert these two?
They said, "We live in São Paulo now."
They said, "We lived in São Paulo then."
If there is no appreciable time gap between the original utterance and the reported speech, could it not be (?)
They said they live in SP now.
They said that they (had) lived in SP then.
But if the elapsed time were substantial, say many months previously, then perhaps (?)
They said that they lived in SP at the time (then).
They said that they had lived in SP at the time (then).
The issue of time difference seems important to me.