Here is a sketch of how the combat screen may end up like.
http://img802.imageshack.us/img802/3469/interfacecombat.png
Each character on the left represents a single player in the world and u can band together with other players. There may be a limit of 3 to 5 players per party, depending on how well that balances out. Parties will be discussed at another time.
Each player can use a move ability to relocate to another square on their side. Being in the back line, behind another player, will make you untargettable by melee based attacks until the player in front of you moves or is killed. I may extend the player area to 3 rows deep and make it a different size but that is still to be determined. The playable squares may become 3 by 3 in size.
If a player dies, their sprite will remain there in a fallen state. Without going into character classes too much, im thinking a specific class like Cleric would be required to resurrect that player. Players can choose to leave the fight and get resurrected at their spawn point and re-enter the fight later, or wait for their party members to revive them. I think it might be good to have an item you can only use out of combat to resurrect fallen allies but we will see.
Damage numbers will appear over the characters sprite with a colour for things like critical (red), magical (blue), ranged (green) and melee (white). If this turns out to be too colourful i will make an option to make the colours white.