Smash Flash 2 is finally being

I was told Chuckles was in this. Who removed chuckle.

The first game was definitely all pre-existing sprite sheets (even the shitty Mario sprite that was a poorly edited version of Mega Man X came from a shitty page on The Spriters Resource), but for the second, they actually made a bunch of new sprites. Like, everyone who wasn't already in either Jump Ultimate Stars or Tales Of GBA is a custom sprite. Hell, back in the early years of this project they wanted to add a couple of their OCs, including a teleporting dude in a white suit with a scythe named Azrael and the triumphant return of Blade the Hedgehog. Shit was cash.
Also don't forget the original game had fucking Mr. Incredible.

Knuckles was never in SSF2, he was in Smash Flash 1 and Project M

to they WANT to get a C&D?

They have been doing that several times over the past decade.

Nintendo's C&D rampage only began a couple of years ago.