Blizzard has stated that there is no longer a damage increase when multiple players are in the same party. (1.0.3)
I attempted the Infernal Machine with a co-op partner with MP level 1. We were sadly unable to take the duo (SK/Magda). We were both being nearly one-shotted and just overall destroyed. We didn't even succeed to the point of getting one of them down, or even to half health. Both players had over 100k DPS. After failing, I decided to ditch my duo partner, and I had relatively no trouble.
After feeling that things were not quite right, I decided to test by going to fight Diablo. I set the monster power to level 3. Based on the facts stated by Blizzard regarding cooperative damage, monster power levels, and the difficulty of the Infernal Machine, this should have made the fight harder than the original duo. To take this a step further, I set multiple restrictions: No using the health-wells, No using WotB, no using potions.
Finally, I decided to go one step further and take the same rules to MP4. This took a few attempts (still no WotB) and felt much closer to what the Infernal Machine was with two players on MP1. Though, I would still say Diablo was easier. The only real challenge was avoiding prisons or moving quickly after getting hit by one.
So I guess I am just asking, is Infernal Machine just that much harder, or is there something broken about Co-Op? Because as stated, without my Co-Op partner, the Infernal Machine became VERY easy.
The build used for all of these tests is that seen in my profile. I did NOT swap WotB for another spell, I simply did not use it.
Edit: Continued investigation shows perhaps SK/Magda is a harder composition? I have tried again on MP1 with a second player NOT joining the battle(Larder duo). It was VERY easy. I also went at another Diablo attempt, this time MP6 with no restrictions:
If I can duplicate the SK/Magda combo issues, I will post that video as well. It was honestly the most difficult fight I had ever encountered (on MP1).