So in order to get the current version of nightly builds to work for me, I had to add a srcsrv.ini file in the same place as the srcsrv.dll and devenv.exe - on my computer this is C:\Program Files\Microsoft Visual Studio 8\Common7\IDE
In that srcsrv.ini the only lines needed are:
The reason for this is that anything in your local srcsrv.ini will override what's in the pdb file. In the current situation, the pdb files for the nightly debug builds have MYSERVER=:ext:firstname.lastname@example.org:/cvsroot since that is what the computer they were built on used. That cvspath does not work without a key though, so it is no good to the average user of source indexed builds.
The second tweak is still making sure that the code is being located properly once it's downloaded. There is a way to change your registry to alter where Visual Studio looks for its cache of source code. I tried this and it worked but I'm not sure it was necessary. It's all still a bit of a grey area.
However, the silver lining? The patch does work - with the tweaks which are pretty simple - so source indexed builds exists and hopefully some people will start using them and familiarizing themselves with source server. In the long run, the more people using it, the more people who will be able to hack on it.
Thanks especially to this article which helped tonight as I tried to find the right combination of settings.
Now it's time to go write some things into the documentation.