A new row of colors in Color Edit mode will become available every tenth time a character is selected.
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Press Select  or Back  Xbox 360  when selecting the following characters to get their alternate costume.
Complete the indicated task to unlock the corresponding character.
Complete all of ten Time Attack stages with a character to unlock that person's "Chibi" icon in your online profile.
Use a second controller to allow an idle opponent. Then, win ten fights without losing any health.