due to the over whelming response I had to this post, I will place the answers here for others:
1. Is the example for this book given that fact that there are multiple CE units all in the same LAN/broadcast domain?
yes, all the CPE devices are in the same LAN segment
2. If on the PE1 MTU-s unit I had another CE device connected how would I differentiate the traffic?
something along the lines of:
PE1 -> would need another l2circuit towards the PE3/PE5 nodes?
PE5/PE3 -> would need another VPLS instance with a neighbor of PE1 and the correct circuit-ID?
so to setup another service independant of the first one:
different l2circuit ID's on MTU-s
different VPLS instance on the PE-rs nodes accepting those new l2circuit ID's.
3. In this H-VPLS setup the vlan tag manipulation and CoS stuff is done on the MTU-s and the other nodes ssimply forward frames?
Yes this is the normal way, the marking and manipulation is performed at the edge of the network.