I tested it on Vivid, and it does not work. The dev_loss_tmo and fast_io_fail_tmo sysfs settings do *not* get set. More information on my test environment below:

root@ucstest:~# cat /etc/multipath.conf
defaults {
  fast_io_fail_tmo 8
  dev_loss_tmo 1024
}
devices
  device {
    vendor "HP.*"
    product "P2000G3.*"
    path_grouping_policy "multibus"
    fast_io_fail_tmo 16
    dev_loss_tmo 2048
  }
}
root@ucstest:~# multipath -ll
3600c0ff0001204a9d12b755101000000 dm-0 HP      ,P2000G3 FC/iSCSI
size=30G features='0' hwhandler='0' wp=rw
`-+- policy='round-robin 0' prio=1 status=active
  |- 1:0:0:1 sdb 8:16 active ready running
  |- 1:0:1:1 sdc 8:32 active ready running
  |- 2:0:0:1 sdd 8:48 active ready running
  `- 2:0:1:1 sde 8:64 active ready running

I know for a fact that the device{} section is being applied, because if I remove the path_grouping_policy keyword and restart multipathd, the topology changes to one path per group:

root@ucstest:~# sed -i 's/path_grouping/#path_grouping/' /etc/multipath.conf
root@ucstest:~# systemctl restart multipath-tools.service
root@ucstest:~# multipath -ll
3600c0ff0001204a9d12b755101000000 dm-0 HP      ,P2000G3 FC/iSCSI
size=30G features='0' hwhandler='0' wp=rw
|-+- policy='round-robin 0' prio=1 status=active
| `- 1:0:0:1 sdb 8:16 active ready running
|-+- policy='round-robin 0' prio=1 status=enabled
| `- 1:0:1:1 sdc 8:32 active ready running
|-+- policy='round-robin 0' prio=1 status=enabled
| `- 2:0:0:1 sdd 8:48 active ready running
`-+- policy='round-robin 0' prio=1 status=enabled
  `- 2:0:1:1 sde 8:64 active ready running

After reverting that change and restarting again, I can confirm that my config file timeout settings are being read by multipathd:

root@ucstest:~# multipathd -k'show config' | grep -B5 -A1 dev_loss_tmo
defaults {
	verbosity 2
	wwids_file /etc/multipath/wwids
	fast_io_fail_tmo 8
	dev_loss_tmo 1024
}
--
	device {
		vendor "HP.*"
		product "P2000G3.*"
		path_grouping_policy multibus
		fast_io_fail_tmo 16
		dev_loss_tmo 2048
	}

However, they are *not* being applied to sysfs:

root@ucstest:~# grep . /sys/class/fc_remote_ports/rport-*/*tmo
/sys/class/fc_remote_ports/rport-1:0-0/dev_loss_tmo:30
/sys/class/fc_remote_ports/rport-1:0-0/fast_io_fail_tmo:off
/sys/class/fc_remote_ports/rport-1:0-1/dev_loss_tmo:30
/sys/class/fc_remote_ports/rport-1:0-1/fast_io_fail_tmo:off
/sys/class/fc_remote_ports/rport-1:0-2/dev_loss_tmo:30
/sys/class/fc_remote_ports/rport-1:0-2/fast_io_fail_tmo:off
/sys/class/fc_remote_ports/rport-2:0-0/dev_loss_tmo:30
/sys/class/fc_remote_ports/rport-2:0-0/fast_io_fail_tmo:off
/sys/class/fc_remote_ports/rport-2:0-1/dev_loss_tmo:30
/sys/class/fc_remote_ports/rport-2:0-1/fast_io_fail_tmo:off
/sys/class/fc_remote_ports/rport-2:0-2/dev_loss_tmo:30
/sys/class/fc_remote_ports/rport-2:0-2/fast_io_fail_tmo:off

Versions:

root@ucstest:~# dpkg -l kpartx multipath-tools
Desired=Unknown/Install/Remove/Purge/Hold
| Status=Not/Inst/Conf-files/Unpacked/halF-conf/Half-inst/trig-aWait/Trig-pend
|/ Err?=(none)/Reinst-required (Status,Err: uppercase=bad)
||/ Name                                                  Version                         Architecture                    Description
+++-=====================================================-===============================-===============================-================================================================================================================
ii  kpartx                                                0.4.9-3ubuntu12.15.04.2         amd64                           create device mappings for partitions
ii  multipath-tools                                       0.4.9-3ubuntu12.15.04.2         amd64                           maintain multipath block device access

Tore