To turn on blood for the game go to the Options screen, move down to exit and then press A+B+C+D at the same time and blood will be toggled on. Repeart to turn blood off.
This only works in two player versus mode. At the character select screen hold down the start button and then move the cursor over these characters in the order they are listed: Genjuro, Basara, Kyoshiro, Ukyom Rimruru, Haohmaru, hizmarum Nakorurum Hanzo, Amakusa, Gaira, Galford, Shizmaru. Once you get to Shizmaru pause there until the timer reads 03 seconds then press A and B at the same time. Zankuro will appear at the bottom for selection.