As a long time covers band guitarist I started while still pretty green as the 'rhythm guitarist' in a 2 guitar band .... perfectly acceptable because the other guitarist was a seasoned live performer and way better at lead work. I got some harmony lead lines and really enjoyed keeping it tight with the drums and bass - and learning plenty from the other guitarist.
The drummer, keyboardist, bassist and myself were friends from school and learned our craft together in endless rehearsing to be note perfect over a 2 year period ...... we ended up being a pretty intimidating rhythm section for propective guitarists and singers when they auditioned and had half-learned stuff.
Eventually the other guitarist moved on and we got a new guy in. By this time the band was known in the circuit and I was a much more proficient guitar player so we shared lead duties - it was never a problem who did what as it soon became apparent which person was better at certain styles of leads .... I as a LP player got the more bluesy stuff and the other floyd rose wielding axe guy got the more shredding dive bombing stuff. If songs had multiple leads we shared them. We'd gather new suggestions for covers after a rehearsal and it was usually just sorted out which guitar part went to whom by a nod of the head once we'd listened to the tracks.
The common goal understood by everyone in the band was to sound the best we possibly could - if I struggled with something and the other guitar player didn't - then he got the job and vice versa. No ego crap - we were semi-professional and people paid to hire/see us so we did the job with that in mind.
It sometimes does require at least one person in a band to take on the responsibility of speaking up and saying "That doesn't sound good" - it shouldn't be a problem (especially in a covers band - where you can just throw a song out and learn another one instead). If someone feels insulted then they are not grasping the concept that it's a 'band' and the most important thing is the collective end result.
If you're in a 2 guitar band the best advice I can give is to
1. Compliment the other guitarist when they do a good job on their parts.
2. Record your rehearsals and sit as a band when listening back - and everyone should first criticise their own playing - then discuss what sounds off and what solutions can be tried. A lot of the time it was "OK .... I'll work on that between now and next rehearsal" which generally worked out ok back then when we were young, free and single with time to sit and work things out back home in front of a crappy cassette player
I've never had to play in an originals 2 guitar band ...... that could be a lot more tricky! But the end result is the key to all...... so accept there might be someone else better at some things than you in the band!
I've been the sole guitar player in bands now for many years so it's all a bit easier ... but I'll always accept criticism on the chin when it's due .... the old ethos of 'Do it right' never has died.