So, as far as I understand, the way margin trading works is that you have to put up a certain amount of money to act as collateral. You then will receive whatever amount that is in the account, minus what you owe. Basically, you get all the gains, but you also take all the losses.

For example, if you want to borrow 100 BTC, you might have to put up 100 BTC. You then can trade with the 200 BTC. If the price rises 25%, so you now have 250 BTC worth, you can return the 100 that you owe (plus interest), and get 150 back (minus interest), giving you 50 BTC profit, which is double the amount you would have gotten if you had just traded your own 100 BTC.

However, if the price drops 25%, you only have 150 BTC worth. You would only receive 50 BTC, or 33% of the account value.

Depending on the terms of the loan, the lender can require you to own a certain minimum percentage of the account (to prevent the account from dropping more and becoming worth less than what you owe). If your percentage drops down below this limit, the lender can "call" back the loan. So you have to deposit more to keep the proportions correct, or the shares will be sold (even at a loss) and the balance will be paid back.

So what I would do is make a system that would let the borrowers trade with the account on GLBSE (through the API), but keep them from withdrawing more than they owe. Both the lender and the borrower would have to trust that I wouldn't abscond with the funds (or break the terms of their agreement), but as long as they can do that, then they don't have to worry about each other.

Edit: Shorting would just be the reverse. You borrow the shares, sell them, and possibly trade with the funds. If the original stock price goes up, you'll have to pay more to buy the shares and pay back the loan. If the price goes down, or if you made enough money trading to make up for the price increase, you buy the shares, return them and pocket the difference.