Great game
Its an awesome game, I love how you dont lag anywhere and its totally easy to play. I have a couple of suggestions though, and here they are:
When the opponent gets you into a corner he starts kicking your ass for a LONG time. the only way you can counter it is by using the teleprt which barely works there, and the strong attack. I say you make him jump back when he punches you for a bit so that way he doesnt waste 300hp before you can strike back. Also you could add a rage meter or something. Like when Naruto's rage meter is full he unleashes the nine tail fox for a HUGE attack. And sasuke can use his evil seal and rock lee open the 4th gate and stuff like that.
However, if you add gaara he will be EXTREMELY annoying with his sand shield. I say you dont put up a shield except he has more or twice the amount of HP you have, so that way you wont have to spend so much time trying to jump around and hitting him.
it would also be nice if you could add a weapons feature, where you can throw kunais and shuriken and the such.
It would also be cool if you could add a block button so that way it you could block certain attacks. except when they throw weapons your defenses are immobilized for a few seconds (+ the damage).
hm what else... I guess thats it! I hope you try to use some of this, i think it would turn out to be quite a game!