These questions are answered in the Rules page, but I can happily answer them here.
The simplest way to put it is that only original canon fictional characters are allowed. OCs and all types of AUs are not allowed. The only exception to the AUs are canon AUs. These are characters who appear in different series but are altered to fit the canon. Best example would be the Final Fantasy characters that appear in Kingdom Hearts, or even the Disney characters in Kingdom Hearts. The characters from the KH universe are considered separate from their original counterparts. So you could have both KH!Cloud and FF!Cloud in the game.
Also, though I say original characters are not allowed, I'm actually still leaving it open to allow them in later on. It's tentative, though, so I can't promise anything.
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The simplest way to put it is that only original canon fictional characters are allowed. OCs and all types of AUs are not allowed. The only exception to the AUs are canon AUs. These are characters who appear in different series but are altered to fit the canon. Best example would be the Final Fantasy characters that appear in Kingdom Hearts, or even the Disney characters in Kingdom Hearts. The characters from the KH universe are considered separate from their original counterparts. So you could have both KH!Cloud and FF!Cloud in the game.
Also, though I say original characters are not allowed, I'm actually still leaving it open to allow them in later on. It's tentative, though, so I can't promise anything.
As to the character limit, it's five.
Hope that helps!