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^^From that article:

"You know what else will be a thing of the past? Having to play co-op as some generic character that you have absolutely no interest in. That's right, in Fable III you'll be able to play co-operatively with a friend, and both of you will get to use your own characters, work in improving your own weapons, and even bring along your own dogs. Molyneux also pointed out that you'll be able to use the touch command with each other, but we chose not to pursue that potential line of questioning--partly because the character that we were now seeing on the screen didn't really look like one we'd ever want to touch. "

EXCELLENT NEWS!!!