Quick search brings up this:
Q: What Engine are you based on?
A: Fighter Maker 2002.
Q: Why Fighter Maker 2002?, Why not ?
A: Ease of developing and Online play are the top two reasons. We could achieve the same results in other engines, but it would require a bigger expenditure of time/energy.
Fighter Maker 2002 really provided us with a good balance between ease of development and quality of release, with the big plus of online play. It might not be to everyone’s total satisfaction we’re working with that engine instead of their preferred one, but we stand by our decision (else we wouldn’t be using it), and trust our final game release will keep on with the fandom’s high standards of quality.
So no, it's not MUGEN.
That said, the existance of MLP:Online isn't new, and gameplay videos showing off the combat and everything have been floating around for a while now.
Besides that, I'm already keeping tabs on MLP:Online. Most of the new shit ends up posted at http://mlponline.freeforums.org/index.php.