I'm not a big fan of sprites in this style, but they look well done I must say. I like that you're trying to balance the characters and (obviously) trying to give it a real game feel. I can't wait to see more.

I'll be honest, I skimmed the story post and character backgrounds, so if i say anything that you mentioned already, I apologize.
-Will the cast be entirely composed of girls?
-Will the game have custom lifebars?
-How many stages do you plan to have in the game?
-What made you choose 1280x960 resolution? Personally I feel like the game would benefit from a smaller resolution (doesn't even need to be 640x480). Visually, it'd present the project better imo.
-Considering you've made backstorys for everyone, and have a general story with a level of mystery, how do you plan to show us progression with the story?
-Why Mugen instead of another engine?

• "Will the cast be entirely composed of girls?" No, but there will probably be more girls than there are guys. At least, that's how it is so far in planning.
• "Will the game have custom lifebars?" Hopefully! I'd like to make absolutely everything custom if possible, but if it gets to be too much work, I might have to sacrifice some things (the lifebars being one).
• "What made you choose 1280x960 resolution? Personally I feel like the game would benefit from a smaller resolution (doesn't even need to be 640x480). Visually, it'd present the project better imo." To be very, very honest, I only chose 1280x960 because the default screenpack only showed up on-screen properly that way (since they made it too huge). When I start to edit it, the resolution will more than likely change. But I definitely agree with your opinion.
• "Considering you've made backstorys for everyone, and have a general story with a level of mystery, how do you plan to show us progression with the story?" Hopefully, I can figure out how to use Mugen Story Mode to help portray the story. Otherwise, I'll just try to rig together cutscenes (think Street Fighter Alpha 3). If all else fails, look out for supplementary material!
• "Why Mugen instead of another engine?" Literally, and I do mean literally, I only picked Mugen because of Fighter Factory 3. Every other engine I've tried, either the editors were too complex for me, or the actual engine itself wouldn't run on my computers (or else I'd be trying EF-12, cause I own it).

Nitpicky stuff:
-That stage would benefit from a lighter sky or a gradient.
-Lala is supposed to be a girl but her big port makes her look like a guy. Intentional?

• "That stage would benefit from a lighter sky or a gradient." Yeah, it definitely would. But I couldn't get the sky to look right when I was working on the stage (so I'll probably just ask the artist that made the background pieces to help me out there), so I just settled on that flat midnight blue. It'll most likely change as much as a Street Fighter 2 stage by the time the game is done!
• "Lala is supposed to be a girl but her big port makes her look like a guy. Intentional?" Partially! The picture is actually rough; I'm gonna experiment with explods soon to try to make a fancy win screen with palette-changing portraits. Otherwise, I'd have put more detail into it (which would more likely than not make her look more feminine). Otherwise, it's just in her personality to look boyish most of the time.

Welome to the forum.