i like the parade floats idea but not the kitsune because it changes the characters wholly into a fox. If there's going to be character transformation, they have to still look like themselves, like the toy story idea.
the characters start out in thier human forms, but can change into either a full fox form, or a hybrid form that looks like a very large fox standing on two feet. Basically, the two people fighting still have some of thier features on them even after they transform, so people can tell the differance between the two.
Also, Basically, on the tails appearing on the people: every time 60 seconds pass, a new tail rapidly grows where it should until it is at its full, big bushy size. It takes 15 seconds for the tail to grow to its full size. Once it does, the person that got a new tail will automatically grow to a bigger size.
I think that explains it a bit better. If not, tell meh what confuses ya, and i'll try to explain it, ok?