I'm 99% sure we (I'm
@marcfaaborg's coworker) resolved the Issue! I'll be 100% when the last page of the book has been tested.

The issue is a bug in iBooks requiring you to have a SMIL-file for every EPUB Content Document. At least, from my reading of the media overlay spec.
We went trough every possible feature that could have an impact on the rendering. Stripping out first CSS animations, JavaScript and everything but the essential HTML-structure of the pages. But the bug was still there. Trying out 2 different timestamp formats and splitting the SMIL-files to represent a single .mp3 (chapter) didn't work either. It only worked when I split the SMIL files into 1 for every .xhtml and only containing one <seq> element in the document.
The timestamps still represent one line of text so it is possible to do unlike what was speculated. When the books is completely finished and tested I'll update this post.
Update: This was indeed the issue. The Media Overlay works as intended. I'll go ahead and report this as a bug to Apple. Unless omebdy knows that we interpreted the Media Overlay spec wrong, by creating only one file for the entire media Overlay.
As an aside:
Quote:
Originally Posted by Doitsu
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We also tried some of those book when starting out this project. . But we never got them to play. However we had other samples (one from Albert Pettain) that actually worked. So while I haven't taken a deep dive into those books, I'm moderately confident that it isn't iBooks fault that they do not work.