I chickened out of participating in a two-player Dance Central dance battle last week at MTV's offices, but, hey, I get it. Dance Central multiplayer starts up a song, expects one player to dance along to it, matching moves to score points, and then switches to a silhouetted freestyle mode as one player steps off and the other steps in. Player two dances the next part, racking up points, and then they trade off again. You can't pick your character; the same on-screen character dances the whole song through. Only the people the Kinect is capturing changes.
Kinect can track two players at a time, so why doesn't Harmonix allow for two dancers in Dance Central? The most direct answer is that they can't. My guess is that the hardware can follow two players for simple movements, like the whitewater rafting in Kinect Adventures, but something as complex as dancing is out. Remember that Kinect had its brain ripped out in order to bring costs down.
It's going to be so much fun watching this stupid thing fail.