I agree that the substitution jutsu is just too simple to use to avoid all hand to hand attacks. To hope to win at all in the game online you have to generally avoid hand to hand.
My biggest gripe is I can block an ultimate jutsu and ninjutsu but holding the guard, but not a grab or a dash into me...wtf is that? There are generally no consequences to even blocking an ultimate jutsu...for most it doesn't even weaken the block. I effect a block more by continually throwing chakra shurikens that are blocked. An ultimate jutsu should only be blocked if you have a full block gauge (it shows through the various colors) and a ninjutsu should only be blocked with 3/4 of a block gauge or more. Grab and dash should follow suit with half a block gauge or more you can fully block either of them. Make people get out of their constant blocking. It's ridiculous that grab and dash are more effective against a blocking than ninjutsu and ultimate jutsu. You should only be able to block a max of 5 taijutsu combo hits before you're open for attack...break up the constant blocking.
Even out the transformations for goodness sakes. The super powerful transformations have to get some sort of limit set on them...it's crazy fighting susano'o, the 9 tails, the 8 tails and some others and getting devastated online in 15 seconds because their transformation is so over the top. I've lost so many matches that were nearly over because of too powerful transformations. Plus the other characters have seemingly no advantage transforming. It would be better to give Kakashi's transformation the ability to match and evade more opponents attacks with his sharingan rather than just lifting his headband with little power change. For some characters an unlimited chakra time would be far more effective than overall enchanced abilities especially in comparison to susano'o, 9 tails, and 8 tails. Heck even Pain's transformation was near pointless.
If Deidara is in the game please goodness curtail his spamming ability...he's the most annoying character to face in the game along with the puppeteers ability to attack while their real body is totally out of harms way (granted that's just being true to the design for the puppeteers).