I still think this is a great idea and something I have considered myself. A while back I found a video and read an article about a guy who built something similar to this that mounted on a table saw and swapped the saw arbor for a pulley. The principal is similar and the Shopsmith has the added advantage of two drive shafts. The idea is based on a pattern in Shopnotes
Issue 86, which uses a hand-crank to advance the belt. Incidentally, here is the
cutting diagram for that design.
Here is
Edwin Hackleman's table saw drum sander, modified from the Shopnotes pattern. He used an external motor to drive the belt. I particularly like the height adjustment mechanism. Several people have built this drum sander, including
Bills Wood blog. Here's
another one from tablesaw.com I just ran across while searching for Mr. Hackleman's.
If you Google "shopnotes drum sander" you'll get quite a few hits on it. I don't have a drum sander so in my opinion, using the Shopsmith to power both the belt and the drum is a great idea. Oh, and if you have an extra headstock laying around, you could pull the sheaves and idler spring out and use it to set up variable speed pulleys.

Talk about going to a lot of trouble...