The only way to get neo is on the PC version through changing Niobe/Ghost's skin to that of neo's. This involves messing about with files.
Secondly when yiu have the multiplayer on, make sure you have two controllers in the ports. Load up a game until you see the levels and scroll to the far left, it should come up 'Multiplayer' and a list of places to fight. There are certain characters for certain areas - eg the subway is Player 1; Morpheous, Player 2; Agent Smith. There are even two cars having a fight, its sooo funny when they do cartwheels!
The multiplayer is a good concept - maybe a future game?