Ok - I love the concept, and the overall execution is cool (love the fighting ring!)...
But are you just mimicing the moves of the player, or are you (or will you) give the Arduino component some intelligence? It would be kinda neat to see it learn moves that you make, as well as perhaps have a different style or "personality" for each of the "thumb covers" you made.
How about adding a third servo, driving a cable to the thumb to allow it to bend (there are various tutorials out there on how to make a robotic "humanoid" hand - using split tubing or chain link for the fingers). This would allow a third level of movement, closer to how a human thumb can move.
Maybe you could add some LED "eyes" for the opponent for more personality. I could really see the possibility of something like this as a fun toy for the kid in all of us...
/then again, I'm a geek... :
