Dear annsong,
If you are using Unipolar supplies as in the figure, there is no way the circuit will operate when the CM level of the output is set at 0 V. Even if you use a low voltage biasing, the minimum value of the output will have to be 2*vds,sat for the amplifier to act as an amplifier, where vds,sat is the saturation voltage of the NMOS devices.
Suppose, you use bipolar supplies, then you can have a zero bias at the output.
Coming to the point about what your Vb2 equation shall be, you can use
Vb2 = VGS2 + Vb1 - VTH1
where VGS2 = sq.root(2*Id/Kp*(W/L))+ VTH2
which will ensure that both the transistors are in saturation. Make sure that the lower transistor has enough room for the current.
I hope that it helps