Hey, Sir Patroclo.
First off, let me suggest that you head over to Flashkit.com’s game forum; there are plenty of talented people there who will be happy to help you out. Specifically, look for a guy named Marmotte. He has an open-source fighting game that’s one of the better ones I’ve seen. Tell him I sent you. 
What you are assuming is correct; basically you will have to code every conditional to get the game to work. But Flash supports OOP, so it isn’t too difficult if you know what you are doing.
Flash can handle a game like this, but Director is definately more powerful when it comes to scripting; the main advantage of Flash over Director is its smaller plug in and penetration. If you are planning on delivering this via the web, go with Flash. If you want to put it on CD, use Director (although I find Director’s Lingo to be much harder than Flash’s actionscript, and if you are not a good programmer yet you might encounter some trouble).
In order to check for special moves, you should use arrays to store player key strokes. For example, the player presses the right key. The program adds the value ‘right’ to the end of an array called ‘moves’. Then, it checks each value of the array to see if they match a pre-determined combination. Below is a quick example in pseudo-code:
// establish the array
player_moves = new Array();
// set special move sequences
fireball = "down,right,punch";
axe_kick = down,right,kick";
// function to add values to the array and check the sequence
char_attack = function(attack){
char.gotoAndStop(attack);
// playes the animation of the attack
player_moves.push(attack);
// adds the last move to the end of the array
sequence = player_moves.toString();
// sets the var sequence equal to the moves in the array
for (i=0; i<player_moves; i++){
if (sequence == fireball){
char.gotoAndStop("fireball");
}else if (sequence == axe_kick){
char.gotoAndStop("axe_kick");
}
}
char.onEnterFrame = function(){
if (key.isDown(key.PUNCH)){
char_attack("punch");
}
}
hth. If you have any questions about this, feel free to ask here or at FK.
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