The headrest isn't hard to cut...you'll need to cut out some of the foam to set it in there. And no, you won't need VGA monitors for the rear if you're mainly going to use them for DVD video.
As far as a switching system, you can find an A/V switcher (if you're using a TV out from your carputer) to switch between sources...something like this:
http://www.clarion.com/usa/products/...ia/MSS430.html
In fact, I have a slightly used one of those for sale, if you're interested. I was going to have independent monitors on my car, but decided to just make everyone watch the same thing