I like the fast pace and movement. Movement seems restricted to dancing in and out (no jumping), which may limit strategy, or at least require something else to make up for the lack of movement. It's hard to see how it works when toe to toe, does it become a mash fest?

In real fighting, dodging when there is no attack generally leaves you open to get hit, and dodging when there is an attack gives you an opening to hit. I guess backing up is a defensive maneuver? What happens if you back yourself into the corner? That should be bad. Maybe movement strategy can be expanded by having backing up be beneficial (for avoiding attacks, setting up strong forward moving attacks), but detrimental if overused (by cornering yourself).

What are the glowing arms? What are the inputs? Are there high/low attacks? Strong/slow and weak/fast attacks? Combos? Special moves? Are there attacks that are punishable if you react in the right way?

It looks like you have some hit stop, are there decisions I can make during that time?

You have knock downs, is there a wake up game?

Can you describe what yomi (rock/paper/scissors) you have?

Sounds like you got a good handle on things!

Street Fighter has attack, block, throw as it's rock, paper, scissors. Block beats attack, attack beats throw, throw beats block. If you remove throw, you are left with "block beats attack", which means the guessing game is completely gone. You'd have to find other ways to encourage attacking by giving blocking drawbacks. There could be a block gauge so if you block too much your blocking stops working. Or "gray life" where blocking turns some of your life gray. After a delay you regain the gray life, but if you are hit you lose all the gray life. If you block it resets the delay. This means the more you block, the more you risk if you do get hit. Anyway, I think you want to encourage attacking as much as possible (a very defensive fighting game is usually boring) but still provide a variety of interesting options for defending.

In Street Fighter most moves cause hit stun but don't knockdown. Moves that do are called a "hard knockdown". This is beneficial because it sets up a "wake up game". When you are getting up, I might attack you, block (or do nothing, or back dash, etc), or throw. If you think I will attack and you block but I throw, you get thrown. If you attack and I block, you'll probably get punished. If you jump or attack and I attack, you probably get hit. The point is that if I land a hard knockdown move, I not only get the damage from the move but I set you up for a guessing game. This allows me to put further pressure on you and if you make another mistake during wake up, you might even get knocked down again and have to play my guessing game again. If Street Fighter didn't have knockdowns and wake up options, I think it would take a lot away from the game. It would be left with just the "who hits who" part and a lot of the "rush down" pressure would be gone. I don't know if it fits into your game, but it's interesting to think about.

No problem, I like fighting games a lot and discussing it (or even just rambling on and on!) is fun.

I wonder if the wake up game could be done with a sort of sub-game that triggers. Eg some games lock the players together and whoever mashes the most buttons wins the sub-game and the other player is stunned for a moment. Mashing isn't very interesting, but imagine during the fight you do some high risk, high reward move (sort of like a hard knockdown, but doesn't have to be a knockdown) that puts the opponent in a sub-game, in a state where they have to do something specific to get out. Maybe there's a bit attack with a slow startup, so lots of risk. But if you land this then the opponent is stunned, maybe they can't attack and you can follow up with many attacks until they block two attacks in a row (maybe attacks or high or low and have to be read and blocked correctly), or some other kind of stun exit condition. Maybe it's not good to have the high risk, high reward move be the only entry into the sub-game, it could happen from taking enough hits in a short period (like SF's stun gauge) or maybe when life gets low or when life runs out. The sub-game doesn't have to be a stun state of course.

The sub-game gives more variables to adjust character strengths, eg maybe a character has lots of ways to cause stun (eg combos ending in stun move) but are relatively weak outside of stun. Differences in characters is what made Suepr Punch Out for NES so great. The sub-game also adds some variety to gameplay. Ideally the normal game and sub-game affect or augment each other somehow and aren't completely separate. You want to flow between them smoothly.

Having progression shouldn't limit your gameplay mechanics. Eg stun could still be a sub-game even though you allow upgrading toughness to make getting stunned harder, reduce stun duration, etc. Using stun solely for something that needs to be upgraded away seems like a missed opportunity, since I think stun makes sense to use as a sub-game, similar to knockdowns in Street Fighter.

Progression allows for strategy while the actual fights are tactics. Progression can be neat for the player, allowing customization, but the gameplay itself needs good depth to make the player want to keep playing and care about upgrading. Personally I find getting new moves and abilities very interesting, but updating stats is much less interesting. Increasing my damage by upgrading strength or increasing my toughness to reduce stun isn't very exciting IMHO. Sure, I earned the upgrade points, but it feels somewhat artificial to simply take less damage versus gaining some dodge move which I can incorporate into my gameplay and learn to use in the best way. If you haven't yet, Google about the game design player reward cycle, there are some good articles on it (can't find the one I was thinking of at the moment, sorry).

One thought is to allow stats to be shifted around but not increased, the total stat points would stay the same. This means you can specialize in eg strength but your other stats suffer. Maybe this is similar to your 4 classes. Maybe players need to adjust their stats to have an easier time winning fights against specific bosses, ala Super Punch Out.

I guess stat increases might make sense if you showed damage numbers, like an RPG. Maybe I have a 2x bonus upgrade for landing a big uppercut when the opponent is stunned, and I'd see the damage number, better showing me the difference between attack strengths. Like an RPG though, the enemies' stats would also be increasing to keep it challenging, so it's kind of fake but can still give the player a sense of self improvement. I think I still would prefer less stat focus and more on creative ways to affect gameplay/tactics.

Aaanyway, I think a good way to design progression is to put in all the features, as if everything were fully upgraded. Don't even think about progression yet, not at all. Make the game fun fully unlocked so it has great gameplay depth, then only after that is finished, pare down the features as much as possible (take away moves, reduce power, increase stun time, etc) but keeping the game playable. With both extremes you can then design a progression from starting out to fully upgraded that matches your tutorials or other goals.

Yep, it's a good plan.

Have you seen the boxing here? I don't know how the gameplay works (the first games had terrible spin-the-stick mechanics) but it's pretty!