I know this is an older thread, but I wanted to basically document what I've learned so far with respect to reicast and multi-player split-screen games.
Outtrigger on split screen works flawlessly, while Re-volt and Toy Commander have issues with player 1 (top half).. very jittery, and it can go completely black in some cases.
If I go to the reicast settings screen (after clicking +START REICAST in the ES Dreamcast screen) and change the 'frame skipping' option from 0 to 2, Re-volt and Toy Commander run fine in split-screen mode. There's a slight decrease in smoothness obviously, but there's no major jittering or blanking of the top-half of the screen. Also, I should note that both of these games run flawlessly when it's just one player (and that's without any frame skipping).
This is a recent version of reicast, updated 3 days ago with retropie_setup.sh.