I'm planning to load balance 2 web servers. I'm considering mounting an NFS share between the 2 servers so they can share the data. My question is: does this setup offset some of the benefits of load balancing? although there are 2 web servers, they both still access a single NFS server. Wouldn't this cause load issues on the NFS server?
You are correct - whatever box is exporting the NSF link will be doing the work for all requests from both web servers. The NSF box then becomes a point of resource contention if I/O is high enough.
Up to a point, but you need to bear in mind also the effect of client and server side caches. If the client has frequent access to files then the performance will probably still be better for end users this way.