Update looks good! Character selection is a welcome addition personally. Everything works as it should, I can't really say anything on that other than good job!
I'm a little surprised by the addition of preferences personally, I assumed it would be that the player picks whoever they want to fight, though I suppose it means more sprite work for you if it was that way?
For the FUTA character, maybe change the symbol from just the female one to perhaps a combo of the male and female symbols?
Changed KO mechanics is fine but honestly a mutual KO was pretty fun.