Wii game modder chadderz is working on a 2-player split-screen version of Super Mario Galaxy 2.

From the video description:

This is a preview/teaser of a new hack/mod coming for Super Mario Galaxy 2: split-screen multiplayer. This will boot via Riivolution and will enable you to play Super Mario Galaxy 2 with a friend on the same Wii, both of you controlling one character, either Mario or Luigi.

As for how the game will play with multiplayer, it'll go like this. Both characters will have their own HP meter, and freedom to explore, kill enemies, etc. Lives, starbits and coins are shared, and if either player loses a life, both players have to go back to the beginning/to the checkpoint that they last obtained. It seems that if one player encounters a cutscene, the other player will be warped to that location (for things like boss fights, to avoid glitches that may occur from having a character outside the fight). Mario and Luigi will also be able to interact with each other, knocking each other around should they see fit, but obviously no damage will be taken from friendly fire :P