The only non-canon part of the manga adaptation is who fights who and why throughout the tournament. The character's powers were not touched from the original story context. Meaning they still possess what they should.
Capcom fighting game, on the other hand, is a pure cross over series, in which Capcom has to change the level of some characters to fit with each other and on over all, nothing in Capcom fighting Jam is leaning towards SF story context, unlike KOF 97 Manga which actually derives it's events to the actual game, KOF 97, in which authors only added some events that made the manga twist over the original storyline. The facts are still present, Yuki was kidnapped, Orochi appeared, Kyo, Iori and Chizuru fought them and they all have the power they possess based on what the story tells.
Akuma is surely not holding back in the fight, specially considering Ryu is the prize, the very person he's interested in. On Gen's situation on the other hand, is as to why a sick old man is seemingly alive after receiving punches from Akuma.
Oh and about the island, who knows what structure that island has. Heck! Who knows. The island must have been very weak due to Akuma very long stay in there, training for a long time, and the Island having hollow parts.
And yeah, I guess this argumentation is better off sealed...