I set up a single iTunes music folder in the Shared Folder on our G5 so that my family can access the songs from a single folder rather than having 4 copies. When in my account, iTunes sees all of my CD-ripped songs including all of those bought from the iTMS but none that my wife bought on her iTMS account. When in my wife's account, iTunes sees the same CD-ripped songs but only the songs she bought with her iTMS account (I cannot see her iTMS bought trax).
This computer is (obviously) authorized for each iTMS account. There is no difference in visibility if I log into her iTMS account from my G5 account and vice versa. Any one else seen this? It seems like a very odd DRM restriction to me. My workaround is to select the Purchased songs playlist and set it for sharing. This requires iTunes be running on the other account (I think) and it also means I cannot easily download her songs to my iPod or vice versa.
Even though iTunes can't see the files, you can see them in the Finder so my first inclination would be to see if iTunes will accept a little nudge: what happens if you drag them into the iTunes window? (Don't forget to set iTunes not to automatically make a copy.)
"However" (the member not the word...), your strategy works but, as you say, requires the accounts to be logged in (and iTunes running). Also, you cannot load the shared songs onto an iPod as far as I am aware (haven't checked).
Indeed, Apple recommends to use Sharing under OS X but describes how to use shared folders in Windows. I seems that Mac users are short changed on this one. I am soon (Ha!) to receive a new family Mini which will have 5 user accounts (4 of us + an overall administrator). There is NO WAY I am keeping all the accounts logged on at the same time, even under a Gig of memory.
Anyway, I'll cross that bridge when I need to, but here is the Apple KB article to get someone started on sharing. Clear as pipe juice....
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Yes, I can download the songs to multiple iPods. The trick was, as iMatt pointed out, to give iTunes a nudge. Not clear why iTunes fails to see certain folders added to the library by other users. The trick is just to drag and drop them into the iTunes window in the other accounts. That way you can have a fully consolidated iTunes library with no need for sharing. Sharing is useful for allowing other Macs on your network (e.g. in other rooms) to stream your tunes.