One of the Abilities of the Luring Cavalier's far challenge is the ability to add twice his level in damage to a single hit, how would this apply to many shot would it count as one or two hits?
Many shot allows the first attack roll of your full-attack to fire two arrows. One attack roll, two damage rolls. Since damage is rolled separately for each arrow I would say the ability's added damage only applies to one arrow.
I agree. I'd add the standard challenge bonus to both arrows (since it functions very similarly to the Favoured Enemy) but only add the extra damage once (as if it were precision-based damage). So the cavalier ends up dealing 3x challenge damage between the two arrows.