ALMOST LIKE CHARACTER GENERATOR

[YinYin]

Just by looking at first two faces (bandit, deep) I'm even more convinced that they were made with vectors.

I agree some of that looks like a simple brush or vector. But many parts of the shirt are pretty smooth:
Applies to all other first character faces (usually the skin).

I don't see any big difference to working with Photoshop apart from an inbuild sprite sheet generator and the seemingly nifty symbols. (for people who aren't confident about their initial design and suddenly need to change the head everywhere - alright)

Nope. You're thinking in bad way.
Instead of drawing every part alone, use symbols.
About like 30+ - different legs parts, different heads position, different torsos... will be used in the whole basic sheet.
You change every one of those 30, and HEY! You've got a completly new character. Now you just adjust some frames and don't need to redraw everything.

That's what Marti does with HF now and I really don't like it. All the same hands, legs, shoes, torsos. Just transformed and recoloured.
Of course it gets a little better if you just replace them with all new body parts, but in that case you still got the exact same character skeleton. That makes the whole game very stiff as all characters with the same base act the same. (kinda like ssbm copy characters c. falcon/ganondorf fox/falco marth/roy etc)
I prefer a more dynamic approach with all different animations the way LF2 does it. Keeps it fresh.

So wait... could this basically mean that Template (potentially) was, in fact, a template? That just a bunch of body-elements were created and those were slapped together to create a body, thus creating a master-character. Later, each new character just became a symbol-replacement + a few extra-frames.

No - otherwise LF2 would look exactly like HF. There it's evident.

I'm pretty sure, that Marti used flash. Original sprites (these in zoom, which are somewhere in the forum, I bet you all know them) seem to be not blurred and built by vectors,
IMO LF was meant to be created in flash technology, but there C++ was over it back then.
They just exported everything made in flash, and made up with another language.
How can I say? Vector graphic and flash technology (which has been much modified, so it's very functionable) was used for HF.
I'm pretty damn sure (99,(9)%) that Hero Fighter is using vector graphic for characters. Just look at these arms swinging. If you were using flash there's no way of not noticing that.
Maybe not for everything, but I'm so sure that for some parts.

HF still uses raster graphics. You can even set the resolution of action sprites to low so the game runs smoother - you will be able to count the pixels on characters while walking for example. They may be drawn/created in flash but they got way too many details to run smooth as vectors in a game. Also again they got a lot of blurring I haven't seen with vectors so far. Please show me how one would do those arm swinging effects for example. (or Davis' breathing pants you mentioned later)

LF was created long time ago, when photoshop wasn't that functionable.
1998 - first version of Adobe Image Ready
1999 - first version of Lf2
I'm pretty sure he didn't use it, and back then there was no other good program using layers and also a timeline, but flash.

I've used PS5 (released 1998). It was pretty awesome already. And I am sure CUHK had this at the time they started development. (probably also flash considering them getting the whole adobe package)
Also doesn't the same thing (limited functionality) apply to flash? Not to mention the first flash was released 8 years after the first Photoshop.

the blur itself could be made in other program, after the spritesheet was generated.
Same as glowing effects.

Now that is something I could imagine. And something I also would like to adapt. First create clean vector bases and do all effects on the final sheet.
Actually I already work in a similar way. I do all effects and most of the blurring at the final resolution. But I don't quite like working with too many programs just to create some graphics. I much prefer using just one.