Oh, awesome chapter there! I loved the battles, but I got really scared in the Scizor - Sceptile battle. I thought Sceptile's skull was crushed, resulting in death. But apparently, he was fine. The Hitmonchan - Chansey battle was hilarious X) Hitmonchan enters the arena, greets Chansey, beats the crap out of it and walks out. I didn't really got what happened at first, but then I understood and it really made me laugh.
I like your battle-style. You don't always use existing tecniques and the Pokémon can even make up their own, making it very realistic.
Oh, yeah, I almost lost my breath for a minute there when I realized that Scyther was going to battle Charizard(Charmeleon back then). I thought someone was going to end up dead, but I'm very relieved that no one did, since I love both Charizard and Scyther ^^;
Otherwise very good chap, I'm glad that they finally made up. No grammar mistakes as far as I can see, but I usually don't look for that since I'm not the person to point out those things.
Keep it up! Awaiting next chapter! The encounter with Chaletwo gets even closer..