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@Forgiven: The short answer is yes, this multisite hack can probably do what you'd like. Bear in mind though that this thread was started to explore a hack that adds functionality that is not in the base XOOPS install. The title asks us to test it out if it sounds like something we might find useful.
I think the impetus behind it originally was to allow a single userbase to access several dissimiliar sites. An example would be a gaming network. The common thread for the userbase is they all play games. Several sites could be created for different games -- HL2, Doom, WoW, Ravenshield. They each have a different theme and can have different module placements. You choose what databases and modules should be shared across them. Perhaps you want a common userbase and a common set of forums. Perhaps you also want downloads for all games to be accessible from all sites. Maybe each site needs a different news module and links modules. Whatever.
The long answer is you won't really know unless you install it and see if it meets your needs. Set up a site with subsites. Does it work as you envisioned? Why or why not? Were the instructions clear enough? What would help to make it work better for you? What problems did you run into? How did you work around them?