I always think of fighting games as having multiple special moves. Think guilty gear with unqiue attacks, overdrives and finishers. I pictured Spike's finishing move being him turning into a full sized dragon and nuking the other player with fire.
Guilty Gear has a character like that called Justice. Rediculously fast, rediculous combos, huge and tough, a super fast instant kill and a a wide variety of obnoxious attacks. She was designed simply to be a troll/boss character, and it shows.
As for spike, well, he could easily be ballanced. Being small means he would dodge well, but most of his attacks would be quite weak and with a short reach. He should rely on special and super attacks to do most of his damage.