staleevolution, I dont remember where I red it, but to make an 8 direction beat'em up, you have to work with the "shadows". I mean, you create a rectangle sprite "on the ground" to be like the player and pin to it the player sprites, the animations, but all the actions will only happens on the rectangles that are on the ground. So, you dont have to make the "punch/kick" to spawn at the player sprites, but all on the ground on the player rectangle.
Just found this old forum topic:
Edit: maybe the idea to work in "the shadows" I got from this old forum topic: