Yes, use XScale/YScale if you want any proper results. LocalCoord is busted on the Y axis (in fact, it totally ignores it; try setting it to 9000 and it does nothing) and scales it the same as X for whatever reason.
What's the native resolution of Vanguard Princess? The scale formula for MUGEN is 320/Original.X, 240/Original.Y.
Therefore if the resolution is 640x480, your scale would be 0.5,0.5. I believe VP is 640x480 so 0.5,0.5 should be correct.
Spoiler: Unrelated to OP's question but useful info nevertheless (click to see content)
The only exception to the Y scale rule is games whose native Y resolution is 224 or a multiple of it (typically 448) because this is the standard we've been using in MUGEN for years. Hardware such as the Neo Geo and CPS2 used 224 for the Y resolution, possibly due to how scanning in the CRT's worked back in the day (I haven't done too much research on this, admittedly) and this stuck until the PS2 era even with the rise in 480p, which actually was a resolution of 640x448 (320*2, 224*2), most likely due to the original resolution of the sprites being designed with a resolution of 224 pixels in the Y direction which looked better in a multiple of that resolution.
Early on in MUGEN, the scale parameter didn't exist, and was also undocumented for quite a while, so many old Capcom characters were completely unscaled until someone found the parameter while looking at the MUGEN EXE in a hex editor. KOF characters looked pretty natural due to their 320x224 resolution, so these stayed as-is and nobody really saw a problem with them (which there really isn't; you're not going to see much difference in functionality with a Y scale of 1.07).