Based on the rules given in the "All Characters" section, it sounds like it's beating the arcade mode with all characters but it's not very specific, what exactly are the rules? Is sasuke a different character than sharingan sasuke? The only run submitted has no video attached, so I don't have much to base it on.

I would assume it means all characters from the select menu, since it doesn't specify.

Very late on this but yes, All Characters is basically playing through every character on the "One Player" arcade mode of the game. Sasuke/Kakashi with Sharingan, Nine tailed naruto, and Mizuki are included with this run as well as you can see in my WR (which has a vid).