If you want to talk immersion, then what should happen is that all the characters speak their own language, with subtitles.
Ooooh, that just gave me an idea. Maybe in the next Soul Calibur, the characters could all speak their own languages. They would have a main language, but have secondary languages, too. They would speak and attack in their own language, but when they start a match, they would do simple taunt if a language they know matches up with the character they are facing.
Like, for an example, Mitsurugi would know a dialect of Japanese, but also know, say, Cantonese and Korean because he is a traveling mercenary. So, if he were to encounter Yun-Seong or Seong Mi-Na, he would give him a special, simple taunt in Korean reflecting his knowledge of that language. Talim would know Tagalog, and would taunt, say, a western character in Tagolog but she would speak Cantonese to a Xianghua or Kilik, or to Yun-Seong (which would give them a logical reason to be able to speak to each other storywise). Maxi would be fluent in Japanese, his Ryukukan dialect, and Cantonese (so he could speak with Kilik and Xianghua)
Raphael would know French, Italian, German, English, and Spanish, seeing as how he was a noble and probably had schooling. So, he could speak to Siegfried in German, Ivy in English, Cervantes in Spanish, and Voldo in Italian (thought Voldo would only answer back with a hiss). Siegfried would probably speak only German, and snippets of other languages since he used to be a mercenary.
For characters who don't have a real-world country, there could be some compromise. Since Astaroth's sect worships Ares, and Ares is Greek, make Astaroth speak a hodgepodge of different languages from the Balkans. Nightmare would just know every language, with the explanation given that he was wielded by many, many people as Soul Edge. Since Algol isn't human any more, he could also just speak every language to every characters, maybe being able to read character's minds. Zasalamel would speak pretty much every language, as well. Hilde would speak German primarily, since everything related to her is German, such as her name and Wolfkrone. Since she's a princess, she could know pretty much all European languages. Rock could speak Iroqouis.
The only characters who would speak English would be Ivy, Cervantes (some), Rock (some, since he spoke it as a kid), Angol (I guess), Yoda, Vader, and the Apprentice.
