Confirmation: Upon reaching act 3, the performance issues clear up completely. I played a few hours last night at the beginning of act 3 in split screen and the performance was similar to the performance when starting the game fresh on act 1.
I suspect there are issues with memory management as the world expands. Hence, reports of decreasing performance as you enter act 2 and greatly expanding the size of the world. Upon reaching act 3, previous areas of the world are no longer required to be kept in memory, and performance is restored.
So, if you're playing split screen and you're getting frustrated mid act2, I suggest swapping to single player and handing off the controller until you beat Act 2. Somewhat annoying to work around, but at least the beginning of act 3 has been playable.
