I would envision the game to be an overall cross of Dissidia and Soul Calibur, with additional influences from Guilty Gear, BlazBlue, Super Smash Bros, and Marvel vs Capcom, particularly with a "Tag-team" aspect to it. Perhaps it would also be pretty cool if it had a "running wall smash" sequence, like in Mortal Kombat vs DC Universe.

As for characters, I'd say bring in as many franchises as possible, but include Final Fantasy and Dragon Quest characters, since those two are the biggest franchises. Even though it would certainly be nice, I don't think they would allow Kingdom Hearts or Eidos-created characters in there, though...