Hi @paul_fynn,
As a Canvas admin for my institution, I would agree that extensive use of LTI tools can make activity harder to track in those courses. Some LTI providers do have their own analytics system, but it's very messy to have to collect all of that data. I know some schools attempt to create a central learning record store and data from every source possible into it, and then create their own dashboards and reports. We're a mid-size public university, so that's really not an option for us with our staffing and budget, but it may be something you could look in to.
With all that being said, I would unfortunately be very much against counting an LTI launch as participation in our data. At least in the US, participation has a somewhat narrow definition for the federal government reporting, and just viewing something in a course unfortunately does not count. For something to count as participation online, the student basically needs to make some kind of submission (discussion post, assignment submission, quiz, etc). While some LTI tools do have submissions, there are many that are just for content delivery.
The new analytics attendance feature does let institution admins define what counts as attendance, so maybe we need something similar for participation which could be used in New Analytics, Admin Analytics, and other areas of Canvas (like the green participation checkmarks in the user page view history). With my coding hat on, I realize the amount of complexity that would add to all of these areas and reports though, and it really may not be feasible for Instructure to do.
Hopefully someone form Instructure will be willing to comment on this from their perspective.
-Chris