Yes, but only Conquest mode. Story Mode doesn't let you do co-op. They didn't think that one through.
7XL lets you do co-op story mode (you will need to remix to get to it, meaning you still need the original game), but again, they kind of screwed up and you can only do co-op if you've beaten the story mode once before. Kind of silly.
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XS2 is the only good Xenosaga game - Lady Ashe
http://backloggery.com/cwistofu