I've been playing through DOS with my partner and we've been enjoying it thus far but there are several quirky features that have left us pretty frustrated with the dialogue experience.

Whenever one of us is talking to a person and the other is trying to follow the conversation, there are a few keys problems that make the process quite difficult if not impossible in some areas. My partner and I are very quick readers also, but this doesn't seem to help.

Here are the issues I've seen:
1) When my partner is talking to an NPC, the text pops up above both of their heads with dialogue, but it disappears so quickly that I never have time to read it.
2) I try to follow the conversation in the scrolling text window to the side but it does not display what my partner's character is saying there.
3) When we are in crowded areas having a conversation with NPCs, the scrolling text window is flooded with all sorts of junk speech from everyone in town. It would be nice if I could enter a building and shut the door to keep that noise out, or even if there were an option to only display relevant conversation (ie: dialogue that I or my partner are engaged in).
4) Sometimes when my partner is in a conversation far away from me with a person I haven't even seen, I get pulled into the conversation and asked for my reaction even though I have no idea what they were talking about.

The dialogue is so well written, so it is a shame to have to struggle through it like this and miss so much of it. Are there any settings I'm missing or are there improvements that need to be made?

There are improvements that need to be made. Currently the only reasonable solution is to press L and go to the dialogue tab. It's not perfect and it's not convenient, but it's the best solution available.

That is what I've been doing for most of the conversations, but unfortunately that doesn't work in the bustle of Cyseal when the important dialogue that I'm trying to read is lost in the flood of: "I've got the best cheese wheels in all of Rivellon!"

This co-op dialog functionality is like the glaring ZIT on the forehead of a beautiful super model.

Its small, but until its deal with, it stands out and makes it hard to really appreciate the beauty of the game overall (in co-op, single player is fine).

I really hope the devs address this issue.

I dont see what is so bad about the dialogue window? I can see what my friend is saying to the NPC and I can see what the NPC says back to him after. Is it really that hard to press L and go to dialogue?

It's extremely inconvenient and you're immediately pulled out of it when it's time to make a decision.

Also if you happen to start a dialogue with something else after the one your partner did that you want to read every line of dialogue will reset it to close that and look at the other dialogue thing above it.