I actually designed the same thing but for the reason of having a higher output voltage swing for the mono part of the signal. I personally don't believe/understand Meier's idea as voltages are just relative anyway aren't they?
I haven't read this entire thread but from what I can see is that your proposed method will have horrible cross talk unless you precisely match the resistors. Here's a schematic of how I was planning to do it.
First it creates the output ground,
OG = -G*(IL+IR)/4
where G is the desired gain. It then puts the difference between IL and IG (the unnamed ground in the schematic) relative to OG multiplied by the gain. Similarly for the right channel. So you end up with.
OL = G*(3*IL - IR)/4
OL - OG = G*IL as desired.
No, you can not just hook ground up to the wall. I've included a simple virtual ground circuit that will do the trick.
As for component values start with something like R1=R2=R4=R5=R8=R9 = ~1k and C1+=C1- = 200+ uF.