The way to do it is for Player 1 to select a character, then press back and move out of the way. Next, Player 2 needs to pick whoever Player 1 picked first. After that, Player 1 has to back a menu. Then go to the character select screen again. Now they're both the same character.
It seems confusing because...I'm not good at explaining. If your still confused you can look it up on MarioWiki.