I will post some links as well as my owned little warehouse site... I have that has mugen characters, although it is still in development but I keep updating, it from time to time as well as other links to mugen, characters, I will put in here also so enjoy...
M.U.G.E.N is a 2D fighting game engine created by Elecbyte that lets you create your own characters and stages.
Customizable title and select screens, life and power bars, game sound effects, and fonts. Characters can have any number of sounds and sprites of any size. Up to 12 different color schemes for each character. Background music can be mp3, mod, midi or CD audio. Supports keyboard, joystick and normal PC controllers..
youtube tutorial Adding mugen characters..
http://www.youtube.com/watch?v=aglOEwGbCB0
MUGEN tutorial 2: Adding characters to EVE Battle: Part 1
http://www.youtube.com/watch?v=AkWLg6g6LbI
MUGEN tutorial 2: Adding characters to EVE Battle: Part 2
http://www.youtube.com/watch?v=hBy8KNEUZ28&feature=related

My other mugen site where I keep my mugen characters I found enjoy. Also as well as other people folders where they have mugen characters as well...
http://www.esnips.com/user/ChaoticHaze
http://www.esnips.com/user/commandmentix
http://www.esnips.com/user/zombiebrock
http://www.esnips.com/user/IKATEN
Get mugen here
Go here: http://randomselect.piiym-net.com/
Download Mugen -> Windows Mugen Plus
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PS : Forgot to mention... That you need winrar to download the characters,and unzip them here is the website to download win rar...
http://download.cnet.com/WinRAR/3000-2250_4-10745708.html
Adding characters
1. Extract the character from the Zip file or rar file. Then place the characters folder into your chars folder.
2. Make sure that your characters folder and it's .def have the same name.
Example = Shin Gouki by Pots. http://www.mugenguild.com/~pots/
His .def is = ShinGouki.def
His folders name should be = ShinGouki
3. Go into your data folder and open your select.def. Scroll down to this part,
.

Add the name of your characters folder.

If you did everything correctly, your character should show up in your game.
Adding stages
1. Extract the stage from the rar or zip file.
Example
"Gamma Base" by "Loganir"
After you extract the file, you should see these files,

Place these files into your stages folder. Don't create a folder for them. Just dump them into your stages folder.
2. Go into you data folder and open your select.def. Scroll down to this part,

Now simply add(Under ExtraStages) stages/yourstage.def
Example

If you did everything correctly, you should have a new stage in your game.
To add music to stages
1. First take an MP3 and dump it into your sound folder
2. Open your stages .def file.
Scroll down to BGmusic or BGM.
Example

Now add you song like this bgmusic = sound/yoursong.mp3

Change a characters stats
Open your characters folder. Look for the .CNS file. Right click it and open it with notepad. You should see something like this,
[Data]
life = 1000
attack = 100
defence = 100
fall.defence_up = 50
^ There you can adjust the characters stats.
Fighting any character you want
On the main menu, select "watch mode". Watch mode is where you can select and watch CPU controlled characters fight each other. You can also fight characters in this mode too. Simply select your character and your opponent.
Now wait until you see the character intros. During the intros, press Ctrl + 1 right before the round begins. This will give you control over player one. Pressing Ctrl + 2 will give you control over player 2.
If this is not working for you, you may need to enable the debug keys.
Enabling Debug Keys
In the game, you should be able to press F1. The F1 button should instantly kill your opponent. This button is usually used for testing characters. You should also be able to fill up your characters health and special bars instantly with the spacebar and other buttons. To enable this feature, open the mugen.cfg file in your data folder and scroll down to this part,
;Set to 1 to allow debug keys at all times. Otherwise debug keys
;allowed only in debug mode.
AllowDebugKeys = 0
^^Change that 0 to 1.
Removing Debug numbers from your screen
To take those numbers off of your mugens screen, in the mugen.cfg, scroll down to this part,
[Debug]
;Set to 0 to disable starting in debug mode by default.
Debug = 1
^^Change the 1 to 0.
Moves for mugen characters
All mugen characters should have some sort of readme.txt file. They have those so that people can fully test the characters and give feedback to the authors (Creators).
To give your regular mugen more character slots for Winmugen
Open your mugen folder. Then open the data folder.
You should see a folder called big. In that folder, open the readme.txt.
After you're done reading that, simply drag and drop the other file, system.def into the data folder to replace your current system.def.
You should have more character slots now.
To increase your mugens screen resolution.
In the data folder, open mugen.cfg with notepad.
Scroll down to this part,
[Video Win]
;Enter the width and height of the resolution you want to set here.
;The optimal resolution is 320x240, but if your video card has problems
;You may want to try 640x480.
Width = 640
Height = 480
^^Adjust the window size there. To make it full screen, scroll down to this part,
;DirectX mode
(Read the huge paragraph here)
DXmode = windowed
^^Simple change the word windowed to: hardware or software.
Then save to make it full screen.
An alternate way you can make mugen fullscreen is by simply pressing Alt + Enter during gameplay. You should probably put mugen into High res first. Just to make it look better in fullscreen mode.
High Res mugen
To put mugen in High res, in your mugen.cfg file, under [Video Win], scroll down the this part,
Set this parameter to use a resolution-doubling filter. You will
need a fast machine to use these filters. You will need to increase
the screen resolution to at least 640x480 for these modes.
0 - off
1 - diagonal edge detection
2 - bilinear filtering
3 - horizontal scanlines
DoubleRes = 0
^^^Read the paragraph and change that 0 to 4 to make mugen High res
