Well, we've barely got 128k to play with, not really a great deal. A PSD file, 256x192pixels with the words 'Double Dragon' in black on white in the centre is saved as 158k. There's the background graphics, AI, front-ends, music/sfx and the game engine (maybe even simultaneous 2 player option and the programmers have decided to go for a single load and not a multi-load).
There's 4 frames of walking animation, another 4 required for walking up the screen, 2 for ladder climbing, 2 each for left and right punch, 2 for kick, 1 for straight-up jump, 1 for flying kick, 1 for head-butt, 1 for being hit in the face, 1 for crouch, 1 for lying on the ground, 1 for elbow hit, 1 for being hit a flying through the air and 1 for jump 2 fisted hit then there are a couple of variations for carrying weapons. Some of these have already been cut down frame-wise and there's the consideration that some moves just might have to be taken down to 1 frame and, if necessary, culled completely. And that is because we have to do all of the above for another 4 or 5 characters and one of those will be 64 pixels in height.
Really, I'd love extra frames but space is already tight. There are certain techniques that may have to be reconsidered like a couple of variations of legs that all the sprites can share and the top half of the sprite is the only truly unique part of the sprite.
So, yeah, I'm afraid Steve's got it spot on - stick to the brief then be prepared to cut that brief in half. But, there's a certain thrill in pulling something off with such limitations