I think it would be fantastic to see the famous characters from two companies that were such rivals together in a fighting game. People would love puting Mario up against Sonic. Luigi versus Knuckles, or Vector Man against Samus. Capcom and Nintendo have always been friends, so it would be nice to see MegaMan vs. Fox, or Captain Comando vs. Captain Falcon, or Dante vs. Ganondorf.
IMO Nintendo should change the environments. Just think of how hectec it would be with 3D destructable backgrounds littered with crates & Pokemon balls. It would be like a super version of Power Stone while on speed. Almost everything would have the potential to be a weapon. You could jump from level to level instead of just jumping from platform to platform. I don't know, it sounds great to me.