I am keen to understand that does family sharing of purchase would work with in-app purchases too as it works with app and music on iOS 8.
As of iOS 14 and macOS Big Sur it will be possible for developers to also offer family sharing for in-app-purchases, as mentioned in the macOS Big Sur press release:
Developers can now also offer Family Sharing for their in-app purchases and subscriptions
These operating services will be available as release versions in the fall of 2020.
Update 04/12/2020: Family sharing of non-consumable in-app-purchases can now finally be enabled in App Store Connect:
Update 23/09/2020: With iOS 14 having been released a week ago, Apple is now promoting the availability of family sharing for in-app-purchases in the App Store. However, the corresponding switch in App Store Connect is not available as of today. I couldn't find it and there are multiple reports on the web about the missing availability of the switch.
No, IAPs are not supported. Any app purchased by a member of the family sharing group is accessible to all but in-app purchases must be made by each individual member, i.e. they are non-sharable.
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