Actually that's inaccurate. Speaking as a practicing martial artist, in a fight or even in sparring most thought simply goes out the window so to speak. You dodge and block and evade where you can, but there's only so much of that you can do. It's better to just get in there and do whatever damage you can as fast as you can and get out of there. And there's nothing more ridiculous to watch than someone who jumps and prances around wasting their energy and doing very little in the process (unless your sole intent is to psych your opponent out).
In fact if you watch a match in martial arts you'll notice that they tend to circle and move around a lot, then one or the other of the fighters (or more, a fight isn't restricted to two participants) will move in and make a series of strikes and blocks and such and then back off. From a realistic standpoint, KH1 was more accurate in my opinion. Not that I don't like the reaction commands. They look cool and tend to take the monotony out of the button mashing fights.