I really got a kick out of messing with the game "figher maker" for ps1/ps2... if making moves/characters for the game could be setup like that, either a pc app, or built into the game itself, that would rock.
Also, since this is a street fighter inspired game (wise choice), I would LOVE to see a "dramatic battle" mode where we can have one player versus two players at once! Or even have a two on two mode for the heck of it even.
Another idea that I would highly recommend would to code in a "alpha meter", so everyone could have one or two alpha-special moves (down, forward, down, forward, A for example).
More things to consider is to be able to use the digital pad OR the analog stick to perform moves, and also have an option screen to change the button layout, infinite timer (for practice), and an audio section to choose in-game music, or xbox dashboard music.
And to make this game idiot-friendly so everyone can enjoy this game, maybe setup a server so people can download new characters directly into their xbox in-game with no computer ftp-ing needed! Have a website dedicated to hosting new fighters, music, and skins for the menus/healthbars!
having the game system-linkable might sound silly to some, but it could be fun for tournaments on x-link and maybe even add headset support (using avalaunches code). Heck doing dramatic battle link up would be kinda neat also.
Also, would be great if you can have a "moves list" section so when you pause the game, you can read up on all of the special moves conveniently without having to do a search on google for the moves etc.
Sorry if I am over-flooding with ideas here, I am just a big street figher fan, and this project definitely got my attention. I would love to help out with developing a fighter for this game, just let me know what tools I need and I'll read up on it!