Interesting posts. Here are my thoughts.
fighter platformer (I mean real platforming, hard to get to areas.) Timing, and very context sensitive.
The biggest problem with this approach is making victory possible for big, slow characters without making it too easy for small, quick characters.
Weapons are character specific, and appear on the field as icons
I think making multiple weapons for each character, each with its own unique attacks, makes things way too complicated. Most of us seem to want a pretty simple game, and learning over 70 movesets is unnecessary. Plus, most of the characters don't use many weapons, and if they do use a weapon, it would probably be better-suited as a basic attack, which the character uses all the time.
Having a few special weapons that function basically the same for each character (such as the laser gun and home run bat in Smash) would probably be a good addition, however.
Another idea I have would be traps, which is the reason for the 8 buttons.
Once again, that seems more complicated than it should be. Traps are a fine idea, but they should activate automatically whenever an enemy gets too close. There's no need for using 8 buttons.
Controls:
Pretty good suggestions. They could probably be simplified slightly, but the basic concept is good.
HUD/Screen Layout:
Good ideas. The idea of separating health and "smash damage" is interesting. If you could work out some way to explain why some attacks damage one more than the other, this could be an easy way to add depth to the game.
Modes of play: There would probably be many modes of play. Below they are listed.
Basic: A two player tug of war.
Lives: A battle of lives with up to four players.
Time Attack: Score the most points you can in x minutes.
Smash Mode: A mode of play that gets rid HP, only using the hit percentage.
Like all these.
Context Mode: Play the game with the arrow keys and the Interact Button. Up to four players on one keyboard.
Victory Mode: Get enough victory points to win. (Like the GBA Digimon fighting games)
Adventure Mode: An adventure mode like SSB Melee.
Story Mode (Tentative Title): A crazy crossover story like Subspace Emmisary.
Platform Mode: A mode comprised of only platforming levels. Co-op play, where the second player plays as defeated bosses.
These modes either seem like they would be a lot of trouble to create for what they're worth. Not that there's anything wrong with these suggestions; I just think it would be better to focus on the other modes first.
Comboing: Combos would not be preset. Instead they would be huge branching systems, where the player must find which combos work for which character/which weapon and you can press the interact button at the end for something like a special/flashy finish. I also like the idea that every character has a weapon level system that would be series specific.
Again, this seems a little more complicated than it needs to be.
Final Notes: Instead of making just one build and only fixing bugs, you should often add characters, and update characters. Because of how long it would take to make a character the roster could start off limited and then expand.
Given the nature of community projects, this is probably the best path to take.