Managing 2 iPhones with iTunes and one iTunes account and computer...

Hello All!
I already have a 16GB 3G iPhone and we're going to be getting another 3G for my wife (whether it is 8GB or 16GB is still to be decided). On my phone, I have about 13GB used, with the primary source being music. We intend the same iTunes account and there are no other devices using authorizations on this account.
*First, does Apple's licensing of applications allow the second phone using the same iTunes account to download all of the previously purchased applications for free?* In other words, will she be able to download any applications I purchased for free since I have unlimimted free downloads on my phone?
Second, and most importantly, I am wondering how iTunes manages two different iPhones on one computer. This will especially be an issue if she gets an 8GB iPhone since everything that is on my phone will not fit on an 8GB model. She doesn't want or need all of my music, so we could very easily not transfer all of the music. But, I'm just wondering how they will co-exist if they are different sizes and her phone might keep running out of room. If the iTunes software doesn't handle this situation well, we may buy a 16GB model just to make our lives easier. *If someone could provide me with information on how the iTunes software handles multiple phones (especially if they are of different capacities) or links to other websites with information on this topic I would really appreciate it.*
We need to make our purchase in the next month, so I want to know what we are getting into if she decides to get an 8GB model with me having a 16GB one. I just don't want to have a management nightmare. I'd appreciate any help in advance. Thanks!
Jim

I currently have 2 iphones, 1 is a 2G 8GB, the other is a 3G 16GB. I use smart playlists on the 16GB and only sync those playlists. The 8G is set up to manually manage music per my sons request. It would be just as easy to have a playlist set up for him and have it sync only that playlist. So yes, you can absolutely have both on one computer. As far as applications, as long as you are syncing to the same computer/same account, it will allow you to place the app's on both machines. I don't know what the legality of that is, however.

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