In the story mode, some characters are already transformed into their final forms (such as Buuhan and Super Perfect Cell). I was wondering if that would be possible in Vs. game modes, as it would add challenge at the start of the battle. It could work like the HP/KI selection bars, but for the character's forms.

Possible, but very complicated to add now. Furthermore, transforming ingame takes seconds.
But I'll see about that when Dragon Ball Devolution will work using Ruffle, in 2021.

To add onto this, I believe a system like BASTON would work best for the character selection, giving the ability to customize each characters HP and KI levels. As for the "selecting transformations", I agree that it only takes seconds and therefor isn't totally needed. What I think IS needed is a way to LIMIT transformations, so we can actually fight against First Form Cell, or Second Form Frieza, without them transforming.

My idea is that in the "Character select" menu, once you select a character with transformations, it would bring you to a sub-menu which displayed all their transformations, and clicking on them will grey them out, which disables them. Here's a quick graphic I threw together to demonstrate:


In this example, Goku would START the fight as Super Saiyan God. Transforming once would make him go Super Saiyan Blue. Transforming again would skip the next two and jump straight to Ultra Instinct Omen. Goku would not be able to transform into Mastered Ultra Instinct.

For things like time-based or health-based transformations, they wouldn't need to function any differently, simply skip to the next transformation in line (or, if they're transforming down, go to the lowest allowed transformation.)

Finally, I just want to say, I fully understand that this would be very hard to code, what I'm saying is not at all commenting on the complexity of the programming. This is just a formatting idea to make it the concept appealing to the player. As just a concept, I think it's pretty intuitive and easy-to-use, as long as it has maybe one sentence of text above it explaining how it works.

That's a very interesting concept, I think it's better than my idea to be honest

In an older version of Dragon Ball Devolution, I think 1.2.1, there was a feature leting you limit the maximum form your character can access, you could for example limit Goku to only be capable of using SSJ2.
I really liked that feature and would like to see it return and if possible it would be cool to let's say have a character start transformed.