2/ Set Project to Linear colorspace. But this is were the weird stuff happens. Since you have to select a color space other than linear and THEN tick linear compositing. That is the same as saying that you want composite in two different colorspaces at the same time?
There is no requirement to select a color space for the actual blending. Internally AE will use linear RGB blending already (in 32bpc). Only the sources and output need actually be profiled in such a scenario. The only relevance for the additional linearization would be if you are choosing one of the limited color spaces as they do have a built-in bias/ Gamma in addition to the footage's Gamma and this may need to be compensated before blending, but that doesn't really make much sense in 32bpc to begin with and one would use 8bpc and 16bpc for such work. I'm definitely not the ultimate authority on this, but i realyl think you are overthinking this and thus making it more complicated than it need be. If input anbd output are set correctly, your workflow should be no different than in Nuke.
Actually, it seems AE doesn't really do it correctly without specifying color space and clicking "linearize working space" as you can see here (These two images is just a 3D render where I've added the diffuse, reflection, refraction and indirect passes together.): http://i1052.photobucket.com/albums/s443/lostparanoia/AE_LWF_error.jpg
Also, the somewhat correct image is not 100% correct either because of (I assume) the color space adjustments that after effects applies.
Another issue when working in sRGB 2.1 (linear) space is that I can no longer get the correct colors for my solids.
Lets say I need to color pick some company's brand color to use as a background in my comp. When I color pick it, it will be in the completely wrong gamma, but I can't figure out any way to correct it so that it becomes the correct colour. I've tried applying a Color profile converter, and I've tried a inverse 2.2 gamma (0.455). Nothing seems to work. It's just a completely different colour.
So my question is, is there still no way of using a proper linear compositing workflow in AE? And how do you work with solids and the colour picker in sRGB (linear)?
You may probably want to read this old good Stu Maschwitz blogpost, which also contains all links necessary to understand Linear workflow in After Effects, including links to his own earlier blogposts on Linear workflow and the link to Adobe whitepaper on Color management workflow.
System colour picker issue is also mentioned in the comments to this post.