How can I make the sound direction from an application "move" with the window position?

This doesnt answer your question directly, however here is a possible alternative:

Go to Windows 7 Ease of Access center and select "Use text of visual alternatives for sounds"

Check "Turn on visual notifications for sounds"

Depending on your preference, select "Flash active window" or "Flash active action bar"

As for adjusting the sound per what desktop its in, I dont believe there is any application out there that does it. I have never heard of anyone wanting something like that. However, I believe it should be possible to do, if there was a programmer willing to do it.

A programming question was asked on StackOverflow regarding this.

It looks as though there are not yet software utilities that do this. However, I think it would be a popular tool.

It could be written for Windows using DirectX, which allows for management of both audio and visual systems.

An important feature would have to be being able to set certain application windows to be exempt from the positional audio so that audio players and video players would not be piped out of the closest speaker only.