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I think it is geared more to enabling you to have one XF site act as the login repository for other sites, XF and other OAuth clients, that you control. Though obviously with the cooperation of another site owner, you might be able to do what you describe (people logging in to your forum with a login from someone else's forum).

Yes, but as I said, I imagine a lot of the use cases would be people who control multiple sites wanting to use one of them as the login repository so that the admin doing the setup would control both sides.

I will leave the other questions to Xenforo to answer.