I think the biggest mistake they made was trying to go for the EVO crowd and the party game fighter crowd at the same time. Cooldown timers in a platform fighter? Ugly red vs blue character shaders on by default? Making people fight in teams instead of FFA with their freinds? Limiting on screen characters to four? Taking forever to release bland new stages without many differences to how all the other stages played? Actually, now that I type all that out, I think their biggest mistake might have been IGNORING the party game fighter crowd. And from a game design perspective, I REALLY hate when a cooldown on character means they do NOTHING when you hit a button hoping to attack. All characters with cooldowns should have weaker modified moves.
There was a lot of good in this game, but it came with a lot of missteps as well.