The colosseum would require group AI, which is very difficult to write, the one on one game would be easier.
I could make the colleseum game online, then all the players would be PCs. But you bring up a good point. Effective group AI would be a bitch.

2d fighting games are pretty hard to get 'flowing' right.
Yeah, especially since I'm not good at animation.
Any 2D fighting game can be made with Mugen.
That they can...