
Actually, maybe instead of a continuously flashing LED, it would be that the highest lit LED would blink on and off to the music (sequence, 4->5->Repeat).
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EDIT: Doh! *Facepalm* Forgot to post my other idea for 2-player co-op. =P
Once again, the number corresponds to the bar. Number 1 is the top bar.
1. Let's say you start your co-op mode. This will be what your bar looks like.
2. Now both of you are nailing the song, hitting 100% of what the song throws at you.
3. Player one gets hit with a nasty guitar solo and loses hit hold. Player two messes up a bit as well.
4. Player one can't recover, but player two is going good again Notice how the left side of the bar is now past the middle of the bar!
5. Player one misses a few more notes, before a small bass solo comes in. Player two screws up badly.

My idea is that, if the bar disappears, you fail, in a similar fashion to how if the bar disappears in single-player mode, you fail. Continuing on this idea, both players start with half of the rock meter filled. Player one might do extremely well and so the left side of the meter is always on the left. However, player two might do really bad, and so the right side of the meter goes far left. Eventually, the bar disappears, and both players fail.
On a standard rock meter, this might be the percents of player one of how good he's doing:
0% 50% 100%
In co-op though, the percent can go negative, and that means both players fail.
100% 50% 0% -50% -100%