In the case that comes to mind, we used the home page as his single landing page for Google Local, and had locations in 4 parts of the city. Occasionally they would come up in the same SERP, but not that often. Much because there was a lot of competition for the terms. I would suspect depending on which part of the city you were searching from, you would see a different iteration of that SERP.
I think of businesses like Starbucks who might be faced with this. Strangely, I just went to search "coffee vancouver" and starbucks didn't show up once. I guess they aren't too successful with it!
I could see this POSSIBLY being concerned domain crowding, but I can't imagine it being against the rules, or Google actively doing anything about it. I could be wrong here of course. I mean, it is a real world thing, it's not like you're gaming anything.
Fair game I say, promote them all!
Yah, most SERP trackers are going to track the first result for your domain, and stop there. They won't tell you that you own position 2 and 3 as well. SO, I would go about this manually. OR, you might try Whitespark's local rank tracker. I haven't played around with it a ton, but I know they have been making strides. It would probably go beyond because it looks at rankings not specifically at a URL level, but a location level. I believe.
As far as traffic and conversions, GA should cover all your bases here.
Imagine a thread without mentioning Whitespark, right?