Cloudstack should really just try and get cloud-init working. I still dont understand what the challenge there is.
For cloud-init to play ball with Cloudstack 3 things need to happen:
1 - This patch https://bugs.launchpad.net/cloud-init/+bug/1356855/ (should not affect anything else and also should not be needed in later versions, ie 0.7.6+)
2 - As it is, cloud-init will use the Openstack data source by default and it will not work in a Cloudstack environment, it needs to be told to use the Cloudstack data source in the cfg file
3 - The data source is not capable of setting the user/root password, a 3rd party script needs to be bundled in - this step can be optional if ssh keys are the only means allowed for authentication, but this would also make the image pretty useless in many ACS environs that AFAIK do use the feature
We are working on fixing point 3, but it will not happen "tomorrow" and even if it did the cfg still needs to be modified to use the ACS data source.
This is why I proposed a cloud-init-cloudstack subpackage, even if we fix 3, 2 will still get in the way.
Let me know if you have other questions.
Lucian