Are there any specific scenarios to go by? For instance I'm a lil lost because I read somewhere that if I share all users and extensions I'd be sharing the configuration/design of each component as well. All I would like to do is create a master and a slave and have users that sign up on the slave site (which houses jomsocial community)be able to access the main site and other sites I create that will be a part of the network.

i.e. Users will sign up at slave1.mydomain.com, user subscriptions and blogs will be maintained on slave1.mydomain.com but I would like for the users to be able to go to the main site which is a magazine/main site to be able to comment and have their blogs shared in a category. slave1.mydomain.com and mydomain.com have different designs, different k2 catergories and a different main menu.

Should I create a different database? or should I share same the database?

I don't know where you read that sharing the users also share the configuration and design.

Perhaps you make a confusion with the option to "share the whole" site that in fact is using exactly the same DB with same table prefix.

If you just share the users like shown in the tutorial video 16, only the users will be shared and not the other things like K2 or menu, ...

Sharing users (or extension) between different DBs is possible but require a MySQL user user that can have privileges in both DB.
In general, it is easier to share the users in the same DB.

Ok, I've read over this and gone back over the instructions and feel I've come far but I'm getting duplicate subdomains (i.e. public_html/demo/demo/demo) and it goes on and on and on. Should I open another forum post for this or is it normal?

Here you mentioned a directory loop demo/demo/demo.... that is another problem not related to the sharing of users that was the previous question.

Verify how you create the directory on your disk.
I suspect that you have create public_html/demo that is a physical directory and created inside this directory an alias called "demo" that point on your master that I supposed is called demo.
If this is the case, this might be correct when you want a URL like www.mydomain.com/demo/demo

If you want to experiment a user sharing functionality, I suggest that you create a test environment that reproduce exactly the tutorial video 16 with exactly the same value. In general, we are using keywords that is compatible with all the lunix environment
www.jms2win.com/en/tutorial#jms12x-16