I agree, I think if both characters are near an npc and one of them starts talking to the npc then both characters should go into 'dialog mode'
Having to read the text log and journal every time your partner talks to an npc is awkward and frustrating.
Another nice optional feature I think would be "both players need to press continue before proceeding dialog", this would be a nice option in case you're playing with someone that reads slower or faster than you do.
