Is there any way to configure Amazon EC2 instances to support multicast needed for EhCache auto-discovery? (through iptables hacks etc)/
There is no multicast between EC2 instances. Amazon does not allow it.
There is a straight answer on the FAQ http://aws.amazon.com/vpc/faqs/#R4
You can submit a request to AWS, I am sure that you (we) are not alone facing a requirement to easily auto-scale an EHCache on amazon.
Terracotta seems to have a solution, cloud tools. http://ww1.terracotta.org/documentation/3.7/cloud-tools/get-started