When I think about a case where they'd use chibi heroes, for some reason i could see a lot more flexibility in something interesting. (maybe unrelated)
If a character was able to level up i think it should have to be something like you go back to lvl.1 when you lose a stock. That way it'd be fair no matter how much time or stocks a match has. I would figure that'd make either the levels pop off easily or there's only a few before it takes a lot of exp to get to it. So maybe we'd only see anywhere from 4 levels in a regular match, as an average per stock i mean.
Hits could count for exp too, i guess, so that it would actually happen without having to ko someone. I dont know if there should be exp when someone gets hit, but enough should allow level ups, and you'd see them pop off when someone gets it, so it'd feel like in an rpg, and that could grant more stats, tho i dunno which ones would be affected, but you'd be more powerful and maybe even new spells as you level.
Maybe an extra spell that can be set in the magic menu
. I know heal could be neat to see pop up and then youre like hey i can heal! and then people going after you before you heal too much dmg
Of course that coul be well balanced tho to not be too good, like anything. Maybe even the mp system to be part of that. And then maybe when you hit someone you'd see numbers come up for the damage, like in the game, and you could also see other stuff, like crits, which would cause more dmg, and those could either be random or not, but when that'd happen maybe you'd see +mp to add to the mana regen.
If they went with mp (I'm surprised im more open to it now), they could make it regen automatically, but slow enough that it'd be worth going in for attacks and trying to crit, or there could be another way to recover it too. Im thinking it should list the mp in a way that feels rpg-like,. If there'd be exp, i wonder where that should pop up to be shown. Oh, and i just thought, maybe level ups could refill some mp too.
Anyway, all just ideas :D
Edit: Now that I've thought about it, I might be motivated to develop that a little bit and turn it into an erdrick mechanics set (rather than move set).
Like, a clean hit could be worth around 35 exp points, and probably a lot less for hits on shields. The first level up could be 100 pts to reach so 3 hits would be enough to get the first level. Then that would go up so the next levels would take a bit more.