My recollection is that the TEI Guidelines do not directly address
this issue themselves, but an example in the reference section of the
1999 edition shows the conjunction "or" inside the alternative title.
See p. 958 (PDF page 980) of P3:1999, a file often (incorrectly,
imho) called P4beta.pdf.
Long before the 1999 edition, the WWP had decided that the "or" goes
in the alternative title. From our internal documentation (R009):
The type= attribute values for <titlePart> are as follows:
alt : an alternative title of the work, often signalled by the
word "or". The linking word should be included in the
<titlePart type="alt">. See examples below.