I noticed you posted a lovely mockup of a Mortal Kombat game in another thread so I'm guessing you're talking about that?
I'm pretty sure the setup you have there would be impossible without flicker.
There are a few tricky ways to re-use sprites, but none of them give you complete control. I'm struggling to put together a good description of what you can do with the "RESP trick" but it's really not practical for moving full size sprites around etc... also I don't think it's very practical to use with double size sprites (I think maybe if you change from single width to double width at just the right time it might work? but it would be a lot of overhead).
I've thought before it might be possible (but tricky) to use a similar setup to that which I used in http://atariage.com/...ng-on-for-ages/for a beat-em-up - that uses a player and ball/missile for each player. You could use for instance P0 and BL for player 1 and P1 and M0 for player 2 - but you'd need to be able to change COLUP0 (The colour of P0/M0) at any given cycle and ensure that P0 and M0 were always at least 3 pixels apart......you could use double size players this way......