Are overlapping dissertations ethically acceptable?
I think for a PhD thesis it is important the writer has enough original and new contributions to earn the PhD degree. When two PhD's work closely together, and write joint publications this can only work if it is clear that both PhD's have made new and significant contributions. 

For example, in a publication which has both lab experiments and numerical modeling it is easy to see that both the lab-PhD and the numerical-PhD have done different things, which are put together jointly into a publication. In this case I would think it ethical that both PhD's get their degree based on the same publications. If, however, the overlap is not countered by the fact that the PhD's each have their distinct niche, I would not find it ethical to let two people get their degree based on the same work. 

In the PhD theses the publications could be used as such by both PhD, but they need to have a different introduction and synthesis chapter as they worked on different aspects of the joint papers. In addition, I would explain the situation and how the collaboration worked in the preface of both theses.