Dinaz - You are right that context is important. But I think it's more a matter of what your starting assumptions are:

A. There needs to be large scale livestock farms so we might as well collect the waste and convert it to local energy.

OR

B. The best model is sustainable organic agriculture where crops and livestock co-exist or livestock is raised free range.

I prefer B. In that context, manure is not concentrated enough to make it's collection worthwhile.

The real world situation is not A or B. Its AAA and AAa and Aaa and Aab and so on. Use this technology on every level where it makes sense.

My advice is to dont bother if A or B is best but make the equipment movable and recycleable if the site it was used on ends up being outcompeted.

Sure Magnus, I know there's a huge grey area. As John Darnell (R. Barlett's advisor) said in his lecture at the NYC PO Conference in Oct. "We need to envision the world that is sustainable and work our way backward on how we get there." I don't think large scale livestock farms are part of that sustainable future so efforts to prop it up seem like a waste of time and energy to me. It's really the idea of subsidizing them that gets to me.
I don't think large scale livestock farms are part of that sustainable future so efforts to prop it up seem like a waste of time and energy to me.

I suspect you are right.  The two most petroleum-dependent industries are transportation and agriculture.  People seem willing to accept that  transportation is going to have to change fundamentally, but not many think the same about agriculture.  

Or maybe it's

C. The best model is to size farms such that energy from manure and other byproducts can be captured and the nutrients recycled.  The actual division between grazing/feeding hay in barns is part of the determination of optimum size.

I'm from Alberta where we have far more cattle than people and a good portion of these cattle are partially if not fully housed for a portion of winter. When combined with some sort of stationary winter feeding lot, collection of manure is not only useful - it is required. Manure is best when deposited on the field, I do not dispute this. What I have a problem with is the idea that AD should somehow be ignored as an energy option because it makes industrial farming more economical and viable. Is it then better to allow slaughterhouse and feedlot operators to NOT better use the masses of manure and entrails they have? Is it better for them to let it settle in open ponds, burp methane into the atmosphere and offend people for fifty miles in every direction? How about spreading it on fields after insuficient aeration treatment? I'm not so sure. Call it green, call it brown. Either way, AD is an effective means of extracting highly useable gas from an organic wastestream. I'm convinced that it is as useful at small scales as it is for large scales. The Chinese peasant will back me up. Even when it helps big agribusiness conglomerates continue to produce cheap, abundant, if somewhat morally and ecologically disruptive food to fill our fat bellies. Panning AD as an energy system because we dissaprove of a particular industries practices isn't particularly constructive. Industries will change as energy availability evolves - but AD will remain possible, feasible and desirable. Instead of worrying that AD will make the bad guys rich, why not support its development as we would a more efficient car. When a higher standard in CAFE is announced are we to complain that this will just perpetuate the problem?
I agree that AD may have a place, particularly in colder climates, but it should not be subsidized over wind and solar which are more sustainable. And it should not be touted as something that will supply power beyond the farm. At best this should be viewed as a slight improvement in efficiency on these farms (sort of like a hybrid recapturing lost energy in braking), not as a primary source of power. Overall though cutting the amount of meat consumption slightly would be a better use of scarce resources. I think the market will start to incentivize this, but not if economic subsidies skew this incentive.