I have been trying different game engines in order to find the best one for rapid prototyping (and to use in the Global Game Jam). I've been making the same game in each engine. I'm using the Simples Pimples graphics, and hence the game is called Pimp Game.
Closed source. Very popular with community, but the maker is unreliable and rarely updates. (They don't even have a website.) Many games have been made with it but they are all free. No-one ever seems to have obtained a license for commercial distribution. Creating characters is tricky but there are plenty of tutorials and examples.
Some people claim this is a mod of Mugen, some claim it is a clone. There's no documentation and the author appears to only speak Japanese. It has source code which I think is written in Lua, and there are several forks made by different people, but no license info anywhere to say whether they are legal to distribute.
Open source side-scroller beat em up engine. Free for use in commercial games, works on Linux, Mac and Windows. Only has single author working on it and development is slow but is still alive. Technically looks pretty good. Could possibly be adapted to make a 1 on 1 fighter.
Paintown contains within in a second separate game engine, which is an exact clone of Mugen. It doesn't seem to be used much so I don't know if it has reached 100% compatibility with Mugen characters, but it certainly works with the Kung Fu Man example. So if it works, this is probably better option for releasing a game than original Mugen.