It's possible using VMware Workstation 7.0. Under VM settings > USB Controller, enable "Show all USB input devices," and then you can freely assign USB mice and keyboards to any VM. Then just move each VM to a monitor and set it to full-screen.
If separate audio channels is important to you, you'll have to invest in a multi-channel sound card. Unfortunately this might run you $100 or so. Once you have the desired outputs, though, VMware can route audio from a VM to any pair of outputs on a sound card.