If the number of sensors were instead '2', instead of 1, then will that mean 1 channel, but expecting 2 pulses per revolution?
Yes. number_of_sensors is used in the division to get revolutions from raw counts.
Or can that mean 2 channels (A and B) and feeding channel A to one external timer, and feeding channel B to a different external timer ----- and then combining the counts from both timers?
You could send both A and B signals to the same Timer external clock source input for 2x counts. I would see no reason to send the signals to different timers.
I'm not certain of the benefit of using the two outputs from a quadrature encoder to increase the resolution of a high speed counter. Typically the quadrature encoders will have multiple pulses per revolution on A/B and perhaps one per revolution on a Z output.
If you can find value in the doubled output, there should be no obstacle to using it. One thing to be aware of is that the code does not handle rollovers in the TCNT value, so be careful of the counting time period and the number of counts at expected rpm.