I'm guessing both have the same base url (www.someurl.com/dnninstance1 and www.someurl.com/dnninstance2) right?  The problem is actually with the cookies that it creates during the FormsAuthentication portion.  As of yet I have been unable to figure out how to fix it, but then again I haven't really spent time looking into it. As a lead, look into the authentication forms name (in web.config the <forms name=".DOTNETNUKE" ... />) -- I'm assuming that they are both the exact same but I haven't researched to see what needs to change on that to make sure they are definitely different.  I *think* I tried changing them to P1.DOTNETNUKE and P2.DOTNETNUKE before and if I recall correctly it didn't change a thing, though I'm uncertain.

I've only had this problem when the base url was the same though... when the url is different (even on the same server) it didn't have that problem.  Additionally, it didn't have that problem unless I was logging onto both of them at the same time.

changing <forms name=".dotnetnuke   does not make a difference.

anyone have any other ideas. all I am trying to is run multi dnn instances. how does the ISP that host dnn do it?

ISPs that host it are still hosting them as separate domains.  That is the crux of the problem, the domain is the same even though separate virtual directories.  Then the ones that mass host DNN on a single URL do then all as parent/child portals (not separate instances), so they all use the same encryption/decryption key, etc.

I'm curious, as somebody else mentioned, if having them on a different Application Pool actually helps anything.  Have you tried that?