Two iTunes for two iPods?

Yes, create separate playlists on your iTunes. Only put "Bob's Playlist" on Bob's iPod. Only put "Jane's Playlist" on Jane's iPod.

You might be able to tick the box that says 'manually manage music and videos' when you go into the summary of your ipod... this way you can both add songs to one library, but only take the ones you want. Still uses only one Itunes tho...

The iTunes library should be different for each user on your computer. Or at least that's the way it works on OS X.

You can install two different iTunes programs, one for each user, on Windows XP Home Edition, but I don't know about anything else.

divide your songs into playlists and when you plug your ipod in to sync under your ipod check to sync specific playlists to each ipod

just put it all on the same itunes and uncheck the songs you don't want on your itunes when you sync it.