The owner listed on the title of the house is entitled to take advantage of the exclusion amount (if they otherwise qualify).
You will file seperate returns rather than jointly if you are not married on 12/31/09. Joint filed return is eligible for up to 500,000 exclusion. Married Filing Seperate, Single or Head of Household filing status will make each of you only eligible for 250,000. So, if title is transferred prior to the sale, you may be subject to capital gains tax on the remaining 250,000 after your 250,000 exclusion.
The mortgage payoff on any mortgages is not involved in determination of capital gains. You will use the original purchase price (I assume you did not inherit the home nor receive it as a gift) increased by any capital improvements (not just repairs) and then reduced by the expenses of the sale. There may be other adjustments to be made if you claimed a casualty loss, or other changes to the property (easement, partial sale, etc).
List the sale on Schedule D if form 1099S is issued even if you do qualify for a full exclusion.