"Blue Dragon" is a solid RPG, if you like games along the vein of "Final Fantasy". It's a bit lengthy (3 discs), but did undergo a recent price drop... $25.00 will snag you a new copy. "Elder Scrolls IV: Oblivion" is also amazing, but you'd want to make sure you get the "Game Of The Year" edition. This already includes the "Knights of the Nine" and "Shivering Isles" expansions, though you can always download them (along with other quests and landmarks) directly from the Xbox Live Marketplace.
Co-op gameplay, you say? "Rainbow Six Vegas 2" has local & online campaign co-op, as well as other cooperative (& competitive) online modes. Personally, I'd suggest a game like Rock Band (or Guitar Hero III). There's nothing like rocking out with the band!
