[quote name='WatTsu']That's perfectly fine. Do the other local players need to be signed in as guests under my Live account?[/quote]
Nope.
On one 360 playing Halo 3
Controller 1 - typeRJ
Controller 2, 3, 4 - Signed in as guests typeRJ(1), typeRJ(2), typeRJ(3)
As Corvin mentioned, you can join social or custom matches.