Project #2 is explicitely collaborative. Student should seek out and form small groups of between 2 and 4 (max) to imagine and construct pieces utilizing techniques from the course thus far. Because of the collaborative aspect of this project, you are free to develop something on a slightly larger scale then you might have on your own.
You are not required to use any particular piece of software/hardware (Live, PD, etc), I would encourage you to explore beyond the confines of what you already know and into the realm of experimentation. If you have questions or need help, direct or advising, on any project idea please don't hesitate to ask.