I recently stumbled upon Etherpad, it's a collaborative writing tool
http://code.google.com/p/etherpad/ - main project page
online Examples:
http://piratepad.net/
http://ietherpad.com/
http://typewith.me/
I want to add this engine somehow to my wordpress and let people collaborate their posts,
I'm wondering if it has been done before and/or does it take more than
shared hosting (that is what I have) to do it [server capabilities or what-not] ?
In general, I think this is a complicated way to go about it. Also, Etherpad allows some very basic font formatting but no images and such things you might want to include in a blog. Instead I suggest looking for some Wordpress plugin for collaborative writing, and you might find something less "real-timey" but perhaps good enough.
Or if you really want to try with Etherpad: Etherpad needs lots of memory (RAM) to run. A typical configuration is 1 GB, but it might be possible to get by on 128MB dedicated to Etherpad. This means you'll need at least 256MB in total for a first attempt. Your shared host also needs to have a Java server installed (typically Jetty) and some proxying server (typically nginx). All in all, you have some work ahead of you in just getting Etherpad up and running. After that, integrating into the Wordpress blog editor. If/how this can be done, I don't know. I'd probably do a client-side javascript-hack to get the Wordpress textarea or richtext editarea to update from the Etherpad readonly view, which is the only place where you can get the contents of a pad as more-or-less raw source text.
A simpler solution would be to just add an Etherpad page through an iFrame. See this post for example - http://www.knowledgepolicy.com/2010/02/embed-etherpad-into-blogpost-or-on-any.html