It has been a while since I last played Sonic the Fighters. I will have to take a look.
The answer your question Chapapa, I think his gun shoots some sort of sphere that when contacts sonic it blows up. I have also seen the screen shot, and if you look at other screenshots, you will see orange spheres floating around the screen. I believe that they come from Nack's gun.
I know Nack is the same size as Sonic in the Game Gear games, but my excuse for that was the Game Gear had a low resolution screen, so making Nack larger he would take up most of the screen, but then I noticed that Sonic The Fighters had him as the same height as well, and I can't really explain that, unless it was some sort of technical limitations, where all the characters had to be the same size.