Generally speaking, it's not accepted anywhere. I've never had someone admit to doing this, but I've been in at least two dungeon runs that went painfully slow. When I started watching the DPS, I noticed that one would move and attack while the other stood perfectly still. In both instances, one character would do a set rotation before ceasing to attack completely for several seconds.
I'm not sure that this is against the ToS since, as you said, they're legitimate characters. Still, I wouldn't risk it, especially if they're not on the same account. People often use this method to powerlevel and then sell characters later.