As long as you can't earn cash, weapons, perks, or anything else (except xp) then it would work. Otherwise, people would start a splitsceen by themselves, and kill all the bodies standing around to get upgrades.
That's why HVS could build in things to prevent that. Like if four players are playing, but only one is moving, that should warrant zero XP. There's simple ways to make sure players that aren't online all the time can still enjoy everything in the game.
Also it'd be sweet to load different characters on my console to use in splitscreen, so it's not like Goldeneye where everyone is a noob with no experience. Kinda of like in the new Bomberman, if that makes sense.
You can earn cash in single player (i think) as well as in splitscreen invasion mode, so I wouldn't be surprised if you earn xp in local multiplayer. Maybe at a slower rate if they really want to prevent people from spamming local to max themself.
PSN: LawnGnome93, Playing: Soul Calibur IV, Borderlands, Darksiders http://i54.tinypic.com/2mo6rtj.jpg