In the spirit of full disclosure, i just posted this question to the ubuntu forums, but i figure more heads working on it couldn't hurt.
I have a multi-seat setup working quite well. Hot plugging input devices works as expected and such. The only issue I am still not able to resolve is getting the audio for each seat.
Here is a summary of my attempts at getting audio to work:
Make ~/.pulse/default.pa dynamically configured based on which $DISPLAY the user logs in at.
See this pastebin for the details.
Load pulseaudio as a system-wide instance.
Couldn't get this to work. None of the audio hardware was accessible to the users.
Use udev rules to mark seats in ConsoleKit. Following udev guidelines found here: http://www.freedesktop.org/wiki/Software/systemd/multiseat
I didn't think this would work, although it was "guaranteed" to work by someone in irc.freenode #pulseaudio
None of those attempts yielded success, which is why I now turn to the community for help. It is quite possible that the suggested methods work and I just messed some aspect of it up, idk. This is the last piece of the puzzle which is needed before I can go and update the MultiseatX page to include instructions for Ubuntu 12.04.
My understandings on the situation:
Access to pulseaudio is restricted to the active session as marked by ConsoleKit (something about an ACL). CK can only mark one session as active at a time. This simple little fact of life leads me to believe that the solution should involve pulseaudio being run as a system-wide instance. Each user should connect to the pulse server and be limited to a subset of all the hardware. Maybe each user connects to the pulse server via localhost, idk. I do know that regardless of my attempts and their failed results, I was always able to use sudo aplay -D plughw:0,0 /usr/share/sounds/alsa/Front_Center.wav to play something to any of the hardware.
I'm grasping at straws and am now down to the last few hairs i can pull out of my head. Please, help me figure this out so we can share the wealth. Any additional information needed will be provided at your request.
