More than one person can be the same character:
First, make P1 choose the character you both want to be. Then unselect the character and move off of it. Move P2 over, and select the character. Go back one screen, then go into the character select again. You should both be on the same character. Both of you select the character. Do whatever you want from there on.
(supplied by: here_ye_here_ye)