Todd wants to "replace our 175 litre water tank with two smaller size tanks. We think we could hook up one just for showers and the other to look after some household needs. Is this a good idea?"
Actually the 175 litre or 40 Imperial gallon tank (46.25 US gallons) is considered standard if not small, rather than oversized for most family showers.
You could separate it into two, but if one ran out, the other would not come to help. If you put two small ones in series, they could help each other out, but would be more expensive than one large tank.
I don't see much reason for two small tanks rather than one large one.