i have that same model vizio, and this feature was one of the selling points. i use it all the time.
to answer your questions, it does scale both inputs equally, however it keeps a 4x3 aspect ratio on each one. so if one of your inputs are 16x9, it will look a little squished. but its not that big of a deal to me. it does not allow 2 hdmi inputs to be used at the same time, but with one on hdmi the other input can be anything else (vga, av, component). with one as rgb, you can have an a/v input or an hdmi, but not component. with component as an input, you can have an a/v or hdmi, but not component or rgb.