Most fun i've had with 2 people:
Mashed: Fully Loaded
Timesplitters 2/3
Medal of Honor: Rising Sun
Mortal Kombat: Deadly Alliance
WWE Smackdown vs Raw 2006
Super Monkey Ball Deluxe
We Love Katamari
Muppets Party Cruise
Buzz! (Any)
SingStar (Any depending on what music you like)
Ace Combat: The Belkan War
Sega Megadrive Collection - Golden Axe 1-3
Lego Star Wars 2
Star Wars Battlefront 2
James Bond 007: Nightfire
Athens 2004
Guitar Hero 3
Champions of Norrath
Lord of the Rings: Return of the King
Bomberman Kart
Need for Speed Hot Pursuit 2
Smash Court Tennis Pro Tournament 2
Pro Evolution Soccer 5
Toca Race Driver 3
Serious Sam: The Next Encounter
Twisted Metal: Black
Quake 3: Revolution
We also like to play "hotseat" mode on a lot of single player games. The Getaway is one good example for this as the missions are more clearly defined than other open world games, and it's always fun mocking someone else's driving.
I'd say this is the refined list of games we usually play when we get together (when time permits):
WWE Smackdown vs Raw 2006
Ace Combat: The Belkan War
Super Monkey Ball Deluxe (Monkey Golf, Target and Bowling)
Athens 2004
Muppets Party Cruise
Star Wars Battlefront 2
Smash Court Tennis Pro Tournament 2
Pro Evolution Soccer 5
My friend tends not to choose driving games because i'm good at them and he says i'm crap at covering-up when i've made a mistake on purpose. (It's easier to miss deliberately without raising suspicion in shooters)