1. "Warning your party" - I generally warn my party that I'm an above-average player who wants to clear an instance very fast and won't tolerate people in my group that can't play well. I rarely group with people I don't already know, so this is rarely an issue. The fact that I'm multiboxing is generally very obvious to anyone good enough to be grouped with me.

2. "twice as many rolls" - This depends. 99% of the time, it's me grouped with a partner or maybe two. It's almost always the same guys (Druid and Paladin buddies). I generally split shards and stuff more in their favor than 1/5th. We'll do enough runs to get say 10 shards, and I'll split them 6 for me and 4 for my buddy. Loot itself is rarely an issue. The main time "twice as many rolls" comes up is during raids, honestly. The best system I found for BC raiding was to roll on some of my team, but not all. For example, if I took 4 shammies into Gruul's Lair, I might use two of them to roll on a token or item. If I won, I would then tell the master looter which of the 4 shaman he should give it to. Everyone seemed to like this system pretty well, since I'd often bring my "main" shaman (who often needed no gear) as well as an alt shaman on the team who did. They thought it was pretty fair to have less rolls than 1/character in exchange for allocating the items to whoever I was trying to gear.

Being a super nice, non-loot-obsessed person here helps. One Gruul's run, I rolled with 4 shaman on a boss where 2 shaman tokens dropped. I rolled a 100 and a 98 (in addition to two other high rolls), beating out two people in the guild. I told the loot master I'd rather see the items go to the other two people, since I knew I'd be back eventually. Those two guys were very happy about it and later organized a lot of raids around my 3-4 shamans. Be a good player, and take care of your raid team, and they'll take care of you loot-wise.

3. "two toons controlled by a single person can't be as good as two toons controlled by two people". I think this is often the case, but not always. For example, I think I can play a resto druid+2 hunters just as well (if not better in some circumstances) in a 5-man instance. Sure, I don't always have independent movement, but I have instantaneous recognition that there's a mob coming to attack the druid and can trap it much, much faster than if I was 2 separate people. Even if I'm playing 2 characters 90% as well as 2 independent people of my skill level, it's often the case that no average player would notice.

90% of the time, I instance with people I know well, and we set loot to FFA. Depending on who needs what (XP, DE mats, cloth), we just kinda work it all out.