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1. you could add a trigger, something like:
triggerall = anim = [190,allofyourintroanimations]
think there's a roundstate = 0 check too. dont know it off the top of my head.

2. you could place it using the root's position. I think posset, x = root, pos x y = root, pos y + 30
Again, off the top of my head.

3. How ever you change the animations, just use the same triggers to PlaySnd.

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1. Add Trigger1=roundstate<2 to the varadds.
2. Use an explod controller, see sctrls.html
3. Use the Playsnd controller. Trigger it on the same triggers you have on the varadds.

A single sprite is still an animation, you have to define one for it, even if it's one frame. You can only use animations in coding, not sprites.

Currently there is no "select palette" button, the round starts when a button is pressed because it's hardcoded into the engine to happen. It's possible to add "start" as a select button but it's somewhat unnecessary when you can start the round by all the other buttons.

[State -2, Play Highlight Sound]
Type=playsnd
Trigger1=roundstate<2
Trigger1=command="fwd"
Trigger1=command="back"
Trigger1=var(21)>0
Trigger1=var(21)<12-1
Value= S256,0
Volumescale=100
Channel=20

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[State -2, Play Highlight Sound]
    Type=playsnd
    Trigger1=roundstate<2
    Trigger1=command="fwd"
    Trigger1=command="back"
    Trigger1=var(21)>0
    Trigger1=var(21)<12-1
    Value= S256,0
    Volumescale=100
    Channel=20

Back AND forward held at the same time is not going to work. You want back OR forward. Either separate it to 2 controllers, use triggerall/trigger1/trigger2, or you can just use the OR operator command="fwd" || command="back"
Also not sure if channel 20 will work if the default number of channels is less than that, and I think it's 8 or 16 something.

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2. Before I start the anim code, am I correct in saying I have to put the .png inside of the character's .air file? Because I don't see any way to activate animation from the .sff with the explod controller.

You put the png into the SFF file. Then you add an animation to the .AIR file while contains one line, that references the group/index of the png in the SFF.

[State -2, Play Highlight Sound Left]
Type=playsnd
Trigger1=roundstate<2
Trigger1=command="back"
Value= S256,0
Volumescale=100
Channel=6

[State -2, Play Highlight Sound Right]
Type=playsnd
Trigger1=roundstate<2
Trigger1=command="fwd"
Value= S256,0
Volumescale=100
Channel=6

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Are you coding everything in state -2 or just have those values there "on accident"?
I'd think doing everything in state 190 would be best. It might be causing some problems.
I should think making the animation would be the easiest thing to do. Even if it's a place holder.
You should also try to post the variables to debug so you can see if your code is working.

Use

[State -2, Clipboard]
type = DisplayToClipboard
trigger1 = 1
text = "Var 21 = %d"
params = var(21)

In Mugen, if you dont see the debug info, press Ctrl+D.

[State -2, Play Highlight Sound Left]
Type=playsnd
Triggerall=roundstate<2
Trigger1=command="back"
Value= S256,0
Volumescale=100
Channel=6

[State -2, Play Highlight Sound Right]
Type=playsnd
Triggerall=roundstate<2
Trigger1=command="fwd"
Value= S256,0
Volumescale=100
Channel=6

[State -2, Play Palette Select Sound]
Type=playsnd
Triggerall=roundstate<2
Trigger1=command="x" || command="y" || command="z" || command="a" || command="b" || command="c"
Value= S256,1
Volumescale=100
Channel=6

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You need to keep the default remappal in state 5900 to set the palette chosen by the AI.
Add Triggerall=AIlevel=0 to the Remappal in -2, so it won't get activated if the AI is playing. (1.0 is required for this)

Pressing any button other than start immediately ends the intro and starts the round as a hardcoded engine feature, so don't use those buttons. The code might not work and even if it does, you wouldn't want to prevent the opponent to select their stuff by starting the round early. Trigger selection on the "start" button only.

In other words, you want to disable the intro palette selection if a button other than the first palette was used to select the character?
In that case, add triggerall=palno=1 to all of the code so it won't work if any other button was used.

"Timer" What you'll need is a variable but yes, you are correct.

You need to set a variable when start is pressed.

[State -2]
Type=varset
Trigger1=command="start"
var(22)=1

You only need to assert the intro flag when this variable is not set and the AI is not playing.

[State -2]
Type=assertspecial
Trigger1=roundstate<2
Trigger1=var(22)=0
Trigger1=Ailevel=0
flag=intro

This is how it works :

Round immediately starts when
-a,b,c,x,y or z is pressed for any player
-both players completed their intros (a certain amount of time passed and the intro flag is not asserted)

You don't want the round to start when a palette is selected. Than would mean the other player can't finish selecting their palette.
So you use the start button to set a variable. This variable means that you selected your palette already.
Your character stops asserting the intro flag when the variable is set, meaning that he is ready for the round.
This doesn't immediately start the round, only if the opponent is also not asserting the intro flag. If they are asserting it, that means they are still selecting their palettes or doing their intro, which means they don't want the round to start yet.
If you used buttons a-z, the round would start before the opponent is ready, which is not good in a 2 player game. It doesn't matter against AI, of course.

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Ahh ok I see. I changed it to the way you said to but when I press start on a palette it doesn't select the palette, I am still able to cycle through palettes.

You haven't added a check for the variable on the palette selection. You need to make it unavailable if you want it to be so. (triggerall=var(22)!=1)

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As for the the AI it still isn't running on a timer so they both just sit in their infinite palette selecting intros.

You haven't added triggerall=AIlevel=0 on the assertspecial.

[Statedef -2]

[State -2]
Type=varset
Triggerall=var(22)!=1
Trigger1=command="start"
var(22)=1

[State -2, Palette Change For Intro Only]
Type=Assertspecial
Trigger1=roundstate<2
Trigger1=var(22)=0
Trigger1=Ailevel=0
flag=intro

[State -2, Next Palette]
Type=Varadd
Trigger1=roundstate<2
Trigger1=command="fwd"
Trigger1=var(21)<12-1
var(21)=1

[State -2, Previous Palette]
Type=Varadd
Trigger1=roundstate<2
Trigger1=command="back"
Trigger1=var(21)>0
var(21)=-1

[State -2, Palette Selection Enabled]
Type=Remappal
Triggerall=AIlevel=0
Trigger1=roundstate<2
Trigger1=1
source=1,1
dest=1,var(21)+1

[State -2, Play Palette Highlight Sound ]
Type=playsnd
Triggerall=roundstate<2
Trigger1=command="back" || command="fwd"
Value= S700,0
Volumescale=100
Channel=6

[State -2, Play Palette Select Sound]
Type=playsnd
Triggerall=roundstate<2
Trigger1=command="a" || command="b" || command="c" || command="x" || command="y" || command="z" || command="start"
Value= S700,1
Volumescale=100
Channel=6

1. Triggerall=Var(22)=0 on the forward/back button check
2. Triggerall=Roundno=1 on the forward/back button check
3. I thought roundstate<2 prevents this, no idea

;(Animation + Sound Config) You can put this code in any state file
[Statedef 256]
physics = N
anim = 256
velset=0,0
sprpriority=99999
 
[State 256, PosSet]
type = PosSet
trigger1 =!time 
x = root,facing*-90
y = 25
ignorehitpause = 1

[State 256, AS]
type=assertspecial
trigger1=1
flag=intro
flag2=noshadow

[State 256, Reset]
type=varset
trigger1=!time
var(29)=200

[State 256, Pal]
type=varset
trigger1=!time
var(26)=root,palno

[State 256, Varset]
type=varset
trigger1=var(26)<1||var(26)>12 ;YOURLASTPALETTE
var(26)=1+(var(26)<1)*11         ;1 LESS THAN YOUR LAST PALETTE

[State 256, PlaySnd]
type = PlaySnd
trigger1 =var(10)=2 
value = S256,0
volumescale = 50
channel = 20

[State 256, PlaySnd]
type = PlaySnd
triggerall=ishelper(256)
trigger1=root,command="a"||root,command="b"||root,command="c"||root,command="x"||root,command="y"||root,command="z"||root,command="s"||roundstate=2
trigger2=var(29)<=5
value = S256,1
volumescale = 50
channel = 20
persistent =0 

[State 256, Countdown]
type = VarAdd
trigger1 =1 
var(29)=-1

[State 256, Countdown]
type = VarAdd
trigger1=!var(10)&&var(29)<150
trigger1=root,command="holdup"||root,command="holddown"||root,command="holdback"||root,command="holdfwd"
var(29)=25

[State 256, Varadd]
type=varadd
trigger1=!var(10)
trigger1=root,command="holdup"||root,command="holddown"||root,command="holdback"||root,command="holdfwd"
var(26)=1-(root,command="holddown"||root,command="holdback"&&facing=1||root,command="holdfwd"&&facing=-1)*2

[State 256, Varadd]
type=varadd
trigger1=(root,command="holdup"||root,command="holddown"||root,command="holdback"||root,command="holdfwd")&&!var(10)||var(10)
var(10)=1

[State 256, Varset]
type=varset
trigger1=!time||var(10)>=17
var(10)=0

[State 256, End]
type=destroyself
triggerall=ishelper(256)
trigger1=root,command="a"||root,command="b"||root,command="c"||root,command="x"||root,command="y"||root,command="z"||root,command="s"||roundstate=2
trigger2=var(29)<=0
trigger3=root,AILevel

;(Palette Config) Put this code under [statedef -2]

[state -2, Palette]
type = varset
trigger1 = numhelper(256)
trigger1=helper(256),var(26)=[1,12]  ; [1,LASTPALETTE]
var(26)= helper(256),var(26)
ignorehitpause = 1

[state -2, Palette Selection]
type = remappal
trigger1 = numhelper(256)
trigger1=helper(256),var(26)=[1,12]  ; [1,LASTPALETTE]
source = 1, 1
dest = 1, var(26)
ignorehitpause = 1

[state -2, Continue Palette]
type = remappal
trigger1=var(27)&&!AILevel&&matchno>1
source = 1, 1
dest = 1, var(26)
ignorehitpause = 1

Do you have "s" defined as a command? We have been using "start" before.

[Statedef 256]
physics = N
anim = 256
velset=0,0
sprpriority=99999
 
[State 256, PosSet]
type = PosSet
trigger1 =!time 
x = root,facing*-90
y = 25
ignorehitpause = 1

That's all, nothing special :

[State 256]
Type=angledraw
Trigger1=1
scale=0.5,0.5

(1 is the number for the logical value "true", so writing 1 as the trigger means it's always going to get activated)