Rick,
that is correct regarding your thinking on the alarm signal. Nowadays I am using the CS-Lab controllers for my machines and they make things simple, For example they have 24v I/O so hooking to an Industrial servo drive is easy as normally they have 24v I/O. The next thing is it can take signals in as alarm signals so if one alarm is seen it stops Mach and also all other drives that it is controlling.
However you dont have that luxury and I never used to either when using the SmoothStepper or before that the parallel port. What I did was have a series of relays, each drives fault signal was to the relays coils and the contacts of the relays were all in series, this if one opened it would break the circuit. I also had the E-Stop switch in that series connection and it was hooked up to Mach as the E-Stop input and when Mach saw no connection it would E-Stop and that would take away the enables from the servo drives so stop them, in addition to stopping the pulse train.
That is not an ideal setup as you are relying on Mach to stop the other drives but it is still a lot better than nothing. I also in addition to this had another relay that was connected to the NO contact of the relays and that was then hooked in line with the enables to the drives, that way if a drive faulted it would take away all enables even if for some reason Mach didnt.
Regarding Mach and Demo, you can use in demo mode as much as you like no problem, it has some limitations such as max of 500 lines of code but most other things work. The poster you are referring to was very likely using a pirate licence rather than just using Demo.
Hood