I built exactly this system (but with MythTV) using an older version of Ubuntu and provided detailed set up instructions in this doc page https://help.ubuntu.com/community/MythTV_Multiseat?action=recall&rev=1 The page was "removed" because it was deemed out of date and no longer relevant.
While the instructions were from when I last rebuilt the system for 8.10, I have upgraded this system through 10.04LTS which I'm presently using.
Note that my TV output uses the Hauppauge PVR-350's audio / video out. The PVR-350 is an analog TV capture card which has a HW encoder for video output (and has not been supported by Myth for the last several releases). To my knowledge, this device has the unique property that it can handle the audio output entirely separately from the normal Linux sound path. This makes the multi-seat simple once the video and HID aspects of X.org are addressed.
If you don't use the PVR-350, you just need to substitute the appropriate video card info for your TV output. I do not know how to handle the audio, however. I am actively trying to find a solution for the audio since my PVR-350 is failing and I need to reconfigure my system since I am about to lose my analog cable.