So a little while ago VGDensetsu mentioned this on Twitter: https://twitter.com/VGDensetsu/status/1639311082723459083 So I was like And a couple days later, we got the reply! And today posted: I wonder if there's ever been any reference to the game prior to this?
So wait, Sega's whole ploy on getting Naka back to Japan was to create a vaporware game directed by another guy and hope it made him jealous/interested enough that he would return? Very on point all around is all I can say.
Fighting Circus definitely feels like NiGHTS's missing link between "we wanted to make a game where you could fly" and "so we made weird dream-clowns the main characters". Interesting.
I'm getting distinct shades of "failed fighting game" from it too though; you know the ones. All those titles made in the wake of SFII that just didn't catch on - Konami had loads, but Sega also did Dark Edge and Burning Rival before they struck gold with VF. Even without internal politics shenanigans involving Naka I fail to see how this actually could've been successfully released.
I don't know what the time period for this is, but if it's say, 1994/1995 (i.e. just before NiGHTS) you're competing with AM2's Virtua Fighter and Fighting Vipers. And maybe Sonic the Fighters. I'm not sure I would be wanting to challenge AM2 with their military grade arcade hardware.
In '93 Gamefan referred a few times to an upcoming Sega game called Real Fighters, later on saying it was changed to Eternal Champions. This was quite some time before anything about Burning Fists / Force Striker existed... I think.