Ikaruga (for Xbox 360 (downloadable)/GC (and thus Wii) can be played in 2 player co-op. The game is challenging alone (though not the hardest game of its type), but together it becomes insanely hard, as you can push each other by mistake (that might have been because my friends are horrible at these types of games
). Overall I would highly recommend this game if you have the slightest interest in vertically scrolling shooters, as it is one of the best games of its genre. Sadly no 3-player support though.
Time splitters series (PS2/GC (wii)) also offers a solid co-op mode. At least the GC version of Time splitters 2 & 3 only offers 2player co-op, but what is there is really good. The 3rd game in the series also offers a large amount of silly minigames and a surprisingly solid deathmatch mode (and even if you have absolutely no interest in these things, the core campaigns are good enough to make the games well worth their price).
Taito Legends 1 & 2 (PC, Xbox & PS2) both offers a lot of great arcade classics, many of which has co-op modes. At least the two PC versions contain a bubble bobble game each, and who does not love bubble bobble?
*edit*
Blood bowl (PC) offers 2 player hot seat. If you decide to get this game, get the legendary edition, as it offers more teams (20, vs 9 in the original).