Criminal record and work on federally funded project I have recently interviewed for a position with a project with a major university. It is funded by federal grant (mainly NSF). It is not an academic position per se, but is led by a few principal investigators who are full professors. This is my first encounter with academia since completing my undergrad degree (I have worked entirely in private sector since then) so it's fair to say I'm pretty ignorant of many of academia's inner workings.

I think the interview went fairly well, and I like what I know of the job very much, but I have a concern: I was convicted of selling drugs (a felony) about 4 years ago. The position I interviewed for is software related and has absolutely nothing to do with pharmaceuticals. 

While my layman's impression is that universities are fairly tolerant of such background in general (Bill Ayers and Timothy Leary come to mind. I'm sure there are better examples) I know that charges like this have bearing on eligibility for FAFSA student loans. Therefore I am concerned that there may be similar restrictions for projects that are the recipient of federal funding. The team may have liked me for the position, but they certainly don't like me several million dollars worth!

For what its worth, it is a private school. This is in the United States.

Any insights into any potential for conflict with federal rules? Any other potential roadblocks, or comments on the culture/conventions concerning these kind of issues?

My apologies for an anonymous question, but I think you can see why. If this question indicates lack of research I apologize as well, but I am outside of my realm of knowledge here and had little success with googling the topic.
I was not able to find any documentation directly related to the NSF, however, I would find it unlikely that it would be a problem.

If nothing relevant is mentioned in your employment agreement/contract, then you are probably fine from a legal/regulatory perspective.

As for the ethical question of whether you should volunteer the information to your employer, I can say that if your performance on the NSF grant were contingent on criteria like your criminal history, the professors would have likely asked you directly during your interview.  If they did not feel that it was important enough to interrogate you about it, it probably does not matter either way.

Where it might be a problem is if the grant requires you get a security clearance, as felonies usually invalidate candidacy for a clearance.  It is very unlikely that a clearance would be required for NSF grants; it's more likely from funding agencies like DARPA and ONR.  With that said, grants don't last forever, and the professors might eventually get one that requires you to get a clearance.  If the professors thought that might be a possibility or concern, though, they would have likely brought it up during your interview.  Also, the government often makes exceptions for software engineers/computer scientists since there is a shortage of ones who are otherwise eligible for a clearance.