First, do you know what is in the iTunes Library.xml file approximately?
What are the iTunes library files? - http://support.apple.com/kb/HT1660
More on iTunes library files and what they do - http://en.wikipedia.org/wiki/ITunes#Media_management
What are all those iTunes files? - http://www.macworld.com/article/139974/2009/04/itunes_files.html
Where are my iTunes files located? - http://support.apple.com/kb/ht1391
The .xml file is a mostly but not completely identical library file in a format readable to applications that can use .xml You could open it in a text editor if you wished and it would be somewhat understandable. The .itl file can only be read by iTunes.
I had defaulted to the single library model because I figured that was the only way it would work, but it sounds like I could have two different library files on separate machines, but they point to a single media library. Does that mean two different computers access the same media at the same time (a very unlikely scenario on my part, but just curious)
Yes, the two library files would point to the same media collection. I believe a media file could be played by two computers at the same time (but don't have a setup to try it) because it isn't really being opened by an application for editing, just read. Perhaps if both people got info on a file at the same time and both were trying to change the metadata such as track name at the same time it might present problems because then the file is open for editing.
Two library file option
So how does one go about configuring each machines unique library to point to the single media library residing on the NAS?
I have zero experience with NAS but I believe it is just like having an external drive. You would need to relocate your media to the NAS using the links below. Now you have your library files (the .itl, .xml, a few other organizational files and folders) on an internal and the media files on the NAS. I am not sure at this stage but in moving the media it may have left the files on the internal drive so you'd want to get rid of those media folders since they are no longer being used. Now copy the trimmed iTunes folder from one computer to the other. At this stage the iTunes folder should just be library files (I avoid calling a media collection a media "library" since this is confusing in iTunes; the library is the library file). When you start iTunes on the second computer the library is already configured from the first computer to look for the media files on the NAS.
iTunes 11 for Mac: Change where your iTunes files are stored - http://support.apple.com/kb/PH12165 - more information at: https://discussions.apple.com/thread/5036221?answerId=22026652022#22026652022
Note when using NAS. The NAS must be up and active before starting iTunes or iTunes will not be able to find your files and will give you a bunch of broken links. Nor will it start looking for them again when you turn on the NAS except one by one as you try to play them and it suddenly finds that particular file is there after all. iTunes has a quick look for the files as you start it and won't look again until you try to either edit or play a file. To get rid of hte broken links in bulk you will have to quit iTunes, wake the NAS, then start iTunes again (or use a script that is horribly slow if we're talking telling iTunes to re-check file links for a whole library).
I understand that in this scenario, in the event that one computer downloads some music, the second computer will not know about it. I assume that the second computer will see that the music was downloaded and I will be able to added the music to the second computer (but does this add a second file of the music or just a link the copy that resides in the media folder?)
Again I don't have hands-on experience with this. I can only say what I think might happen and if you find something isn't working as we thought then we'll have to modify methods. I am presuming you are leaving your preferences set to default. iTunes will now be storing media on the NAS but organized as it would as if it was on the internal. When you add media on one computer it will place the media in the correct folder. If you go to that folder from computer 2 and drag it to an iTunes window it may just see there is already a file in the correct location and you're fine with no duplicate. If it places a second copy in the folder then there may be ways to get around this, perhaps by holding down the option key while dragging the file which normally tells iTunes to add an item to the library but use the file where it is currently located (which in your case would be okay since it is located in the right place already).
I would think this would work for movies too. I have zero movies in my iTunes library so again I can't speak from experience.
If you do this you might wish to check the Dougscripts web site. It will require diligence on your part to keep both libraries up to date. I recall there is a script you can run which will browse a folder you select and add files to your library that are in the folder that are not already in the library. I don't know if it will work down folder levels which is what you would really need, or it just looks at one level in the folder and not search a while library folder and subfolders.