I used to have one (i.e. no longer have it :P), so let me try to describe it for you.
You know how the top side zips open... I think on the inside of that flap, there's a neoprene "loop" that runs about 80% the height of the bag. Your Total Airhead would go there. You'd put your walkman in, sitting on the other side, and zip it up. So yeah, you can say they're back-to-back. And you can certainly put the walkman in the "loop" and the TA on the inside.
Putting those two back-to-back didn't work very well for me. I'm some kind of a control freak (
) who'd like to have easy access to every button I need (and the TA's volume control) because I'm tweaking them all the time. But having the walkman sit vertically tends to obstruct access to its buttons, and using the walkman's remote makes the bag kinda meaningless.
For the size of MD portables you can put in... if I recall correctly, it's best if they're not over 3/4" thick. As to length/width, most of today's models will fit even if you use an external AA battery case. If you use a very thin player (e.g. Sony E900) there'll be space for a couple of MD discs.