Perfect solution.

They can handle jump the same way they handle auto-follow.
When I 2-box, Character A is followed by Character B. When character A stops moving, character B stops moving on Character A's screen, but is running in place on Character B's screen. I'm not 100% positive, but this is probably because Character B isn't changing positions on the x-y plane...so there is no need to display a running animation on any other clients.
If SE was to make jump be a "z" function on an x-y-z plane, they could configure it so that players could either choose to see the "z" plane movement or not. This way, if you want to see jumping, you can do so. If you don't want to see jumping, you don't have to. I mean, we already see ridiculous clipping when players run up and around small hills, so the clipping produced from players that would be jumping wouldn't be all that different.

If you want to jump, you can jump.
If you don't want to jump, you don't jump, and you configure your client to not see other players jump.

Just my 2 cents.

Later all...go Yoshi!!