Thank you everyone for all the responses. It is enlightening.
To answer the easiest question first, our footage is primarily HDV with a little bit of DVCPro HD.
Matt’s description of the set up is far better than anything I could probably write. We were looking for a very low budget solution (under 5k) for two editors to share footage and work on the same project. We’ve had some problems with the set up – mostly due to my lack of experience with networking and some bugs in 10.5.6 – but now that the whole thing is set up properly it does seem to be working well, for our needs. I have done things just with file sharing to access firewire drives on shared computers and I do not think it is as fast.
I think for our purposes, two project files will work and we can just pull sequences into a master project when we’re ready to combine scenes.
Another question though – If both editors want to do something with the same clip… say both end up editing parts of that clip into their sequence… would that cause problems?