Hi and welcome!
fonkeek I have no knowledge about how a system like funkwhale could work.
Well, thats probably the best position to express your expectations and needs 🙂
fonkeek Let's say that I have 12 audio files uploaded. I'd like to give access to the files numbers 1, 2, 3, 4, to user "A". I'd like to give access to the files numbers 5, 6, 7, 8, to user "B". And I'd like to give access to the files numbers 9, 10, 11, 12, to user "C".
Thats not easily possible right now. A workaround would be to create a library for each user you want to share the tracks with and uploading the songs multiple times to different libraries if needed.
fonkeek I'm assuming it is possible, and I'm guessing each User should have a funkwhale account where they could stream their dedicated audio files to an app on a android device?
fonkeek If the wifi is down while a user playing one of his files, will the sound shut down instantly?
This depends on the client. The Webinterface we offer has a certain amount of seconds buffered, or even whole tracks. The Android-App can even download whole tracks in advance, which allows you to play those tracks without connection at all.