I've always wished for a 2 mouse cursor 1 computer, however I have never seen this on windows. But a quick youtube search shows that it definately is possible! However, obviously there's not a lot of real-world applications for this, otherwise I would think it would be everywhere by now. Also, there's different implementations of this design. Some videos show a working 2-cursor setup, some show one machine running two virtual machines with different input devices simultaneously, and some show 1 mouse on 2 different machines.
Unfortunately, this is a complicated task to just get running on a single computer. Windows has the concept of window 'focus', which is how the computer knows what text box the user intends to type into. The video showing 2 cursors on one system shows that the multiplex mode, the mode which allows 2 applications to be interacted with at the same time, talks about lag, probably because the program is really fighting the operating system for this simultaneous control. So not only would this problem need to be solved, the recoil game engine and zero-k interface would have to be changed to allow 2 different users on the same machine, because the game also assumes 1 user. I want to say it's possible, but it would require thousands on thousands of people to re-engineer operating systems(linux kernal, linux distrobutions, microsoft windows, apple macosx), then it would require all of the software in this game to be re-engineered to use the upgraded operating systems. It would be a feat of software engineering, and hopefully all the operating systems would use the same general interface so porting applications is not a nightmare.