Apologies for not replying sooner, haven't checked this forum for a while.
No we didn't get it sorted as our students login to the student extranet (on Moodle 2.2) and MNET to their courses on Moodle 1.9 version. The extranet has also an MNET link to Mahara and works quite well but not what I would have liked.
We have started our plans for the 2012-2013 academic year and will keep an eye on Martyn's annoucement of removing MNET for Moodle 2.3 next June (http://moodle.org/mod/forum/discuss.php?d=175158). Also, with the new feature of Multi-tenancy (MDL-28946) for Moodle 2.3, which would possibly assist us with our 8 Moodle installs and maybe our VLE/extranet setup next year.
Also, we stll do not have some form of authentication for the students logging in, which is out of my hands at the moment, but hopefully we will for next year.
An interesting and busy 2012 coming our way!