Sure, this sounds fun! Here's my thoughts (as if anyone cares >_>)
DL Interpretation Guidelines:
Items: Pretty much agree on everything Djinn had said here. I allow anything of any sorts to be used with item skills, i.e., Rikku's Use, Alchemists in AI, Mystic, etc. I allow as many as possible that can be held (e.g., if max item holding is 9, I allow 9; if 2109, I allow 2109), with the exception that if there's only one of the item in the game (e.g., FF4 Spoon), then that's all that I allow. I also allow Minato, Jack, etc. the ability to use items. It's...a unique ability of theirs in-game to use items, so I don't see a reason to disallow it. Granted, I don't allow Minato to use Medicines or other items that other characters can use, but it doesn't make a huge difference. As for DQ4...definitely don't allow Solofia to use items. If you put an item in an AI character's inventory, they use the item.
Item-casting: Item-casting I allow, always. If it's multiple unique items, I let them use them as often as they want. E.g., if a character starts a fight equipped with a weapon that they can use to item-cast, then they can use it - if they also happen to have other unique items they can use to item-cast, then I let them use them. However, if it's a non-unique item (e.g., FF4 rods and staves or FF items in general), they can have it, but only the one they have equipped (so only one Pearl Rod, etc.)
Money: I assume the skill is fully powered up. Unless money isn't some type of renewable resource (so...uh...FE11 Gil Toss?!).
Limit Meters: I am pretty sure I go with allowing full AP bars in LoL, Lufia 2, LoL2, LoD, etc. It's renewable, easy to do, and a majour part of in-game. Also, you typically do have them completely filled anyway. It's not like GX, where it starts at 0 every dungeon. For SoA, they start with their initial SP (which I assume as 4 for everyone, since I do take levels higher), not a full bar, as you can't start a fight with a full bar (max SP is based on the characters added values, and initial values are always < max). I also do put a limit on all meters of this sort, e.g. VP (I don't allow energy to build up, which really hurts a lot of the cast), and don't let SoA characters exceed their max SP, since, in-game, if you have one character, you can't do that. As for WA games...same thing as with SoA - they build it up, since that's what they do in-game. Except WA2 and WA3, where it's their level. Then they start with their level.
Weakness: No majour differences in thought. If a character has a 4x weakness to lesbians in-game, they have a 4x weakness to lesbians in the DL. Of course, if that weakness doesn't exist, I don't place plot alignments onto it (so...nuclear isn't fire elemental, it's nuclear elemental). The weaknesses are based on the character, so even if an attacker hits 50x damage on a weakness in-game, they don't do that in the DL. I do also considered EB HP rolling and CC fields, though. It's important for their games, and are legitimate advantages they have in-game.
MP Death: SO3 characters die when their MP is killed. Whether I let them kill or not...no. See above - it's a weakness of theirs in-game, and they have the advantage of being able to do MP damage when a lot of other casts can't. (now, how to scale MP damage...)
Additions: Forgot about how counters work in LoD. Interesting. However, for additions and the like that require skill on the player end, I...go back and forth between allowing them to be perfect and forcing possibilities of screwng up. Even the best person at the Judgment Ring or additions or SMRPG timed hits will make errors, and obviously the characters can't do them perfectly themselves, or they wouldn't need player input. Also, in the aforementioned games, accessories exist that allow skills to be perfected. So...I don't know where I stand, though I lean towards assuming some failure.
Movement speed is how I go with ARPGs. If a character is fast (i.e., Guy, Fayt) via movement speed, then they're fast via speed. Fayt's faster than, say, Kresnik to me. Move speed is very sexilicious in-game, so it feels right to make it important and useful in a fight.
Distance...eh. Don't think I incorporate that much. I would like to, but...even ranged characters aren't necessarily faster or whatever. In terms of counters and the like...if a character is immune to LR attacks in-game, then they are immune to LR attacks in the DL. But I don't do much else there.
Hexes: I assume them. I assume a randomly generated battlefield with random hexes, and a random placement of the character, just like in-game.
SRPG Movement-based initiative: Don't think I do anything for this. If the character goes first in-game, I assume they do in the DL (so...Laharl attacks first, then is average speed). For FFT...they have a real speed stat, so that goes. Same with WA5. Brig is level-based, and I don't know how I want to do Brig (2 ways - all at level 30, or scale them a bit like FE, i.e., take them at level 20, those initially above 20 get those levels) speed. AtL games also have speed. FE games...I take their speed as speed. It's...kind of how it works in-game, though yes, it's not perfect. After initiative turn, of course. Or non-initiative, if they're the enemy.
Focusing: Fully allow this. No reason not to - it's how the skill works in-game, no reason to not allow it to do that in the DL.
Skills/Equips: All unique skills/equips are allowed. The exception is that the skills/equips must be usable in the main game. So, VP1 SG not allowed, but VP2 SG allowed (same with CoT, Morlia, etc.). Also, if there is enough of an equip to go around in the main game (Shield Rings in ToP) for all users, it's ok. Uniqueness is special. If it's storebought, I allow it. This includes all accessories, not just status guards. You can buy these and use them in-game - see no reason not to allow them to be used. I default characters to initial accessories, and use them for averages, however. As for runes, materia...if they start with it, great. Storebought...I've been leaning towards allowing them, and think I will. It's similar to FF1, in that regard - if I don't allow that, then it's pretty stupid to allow FF1 magic - I should really just limit it to storebought stuff, which makes Red Wizard cry badly. If there's plot backing for skills/equips, they get them too. So, L2 PCs in the final party I give upgraded spells based on L1 (or give them the spells, such as giving Maxim healing spells). Any plot backing for something is given - it helps make things cooler, to me. I guess this means I give Rinoa Leviathan based on her FF8 demo form.
Plot elemental-typing: No. Things are elemental as they are in-game. If something is goat elemental in-game, but has a wind-elemental animation? It's still goat elemental. If it's called wind but looks lightning in-game...it's wind. If it's called lightning, looks like lightning, but has no elemental alignment in-game? It's non-aligned. If it's grass-elemental in-game, it's grass-elemental in the DL. Etc. I also don't allow elements to be resisted by all-resisters if they don't resist them naturally (so...Minerva doesn't resist goat-elemental attacks).
Guarding: If a character can defend in-game, they can do it in the DL. No restrictions.
Status-blocking for bosses: See elemental stuff above. Same thing, generally. Relm's Control, for reference, I allow and it hits Control immunity/resistance (and...level, apparently).
Equipment Breaking/Stealing: Yeah, agree here, mostly.
Forced Retreat: I allow these to work. If a skill makes enemies disappear, it works. Not having to fight is a reward in itself, and allows for victory in-game, so it's odd to not see it that way in the DL. Dropping someone into a vortex works to get rid of them pretty well >_>
Damage scaling lower limit: Subtractive defenses all the way for me. It's the original, and true way to do things. So yes, Mint doesn't break Rand's defense.
Plot fusions: Characters are allowed forms if and only if that form is them story-wise. Lyon (FE8) doesn't get his boss form for me because of this - it's never him fighting you, it's Fomortiis in his body. I therefore vote on PC Lyon (who...is still decent). Lyon is never Lyon, but Fomortiis - therefore, I could also see taking Fomortiis as Lyon in the DL...which is better for him? This is also the reason I take Shizel's PC form, since...at least from what I remember, Shizel is only Shizel in the flashback, not as a boss (it's Nereid controlling the body).
Temp-scaling: Temps are scaled to the party they were last with upon leaving. It's the party they were meant to be scaled to - can't see taking them against phantom parties or the like.
Turn order: All things converted to turn-based to me. The old way is the best. I don't allow EXAs between characters unless both characters can be EXA'd in-game.
Unranked forms: As long as they are still the same character, it's fine by me. So yes, Kratos can use his ToV form, etc.
All of the above is, of course, always subject to in-game respect coefficients, attractiveness, and character personality, which are far more important than battle prowess or the like. Orlandu for Puny.
...wow, so many things to think about. I might elaborate more later.
