Houston, we have a layering problem.
Let's look at a game screenshot and how the bars are with the portraits
The shadow, lifebar frame, small circle, and the larger circle are all above the portraits
(Take note of the anti aliased sprite edges. no amount of portrait editing is getting over the fact they should be behind the sprites)
In mugen the lifebars portraits are layered after the bar sprites, so they will appear above any sprites in the [Lifebar] section.
We could try adding layerno = lines and get over this, but here are the problems
Method1: Portraits at layerno = 0 and lifebars at layerno = 1
Outcome: characters when jumping would pass in front of the portraits, but behind the lifebars and that we don't want
Method2: Portraits at layerno = 1 and lifebars at layerno = 2
Outcome: characters when jumping would pass behind the portraits, and behind the lifebars
Now i know method 2 sounds like the solution, but in my opinion having characters obscured by the bars when jumping looks stupid
What we want is the portraits at layerno = 0 and the lifebar sprites at layerno =0 but layered over the portraits. Mugen is basically gonna say "fuck you that ain't happening" to that idea
So next time we will look at ways of getting around this issue by using other options