The Japanese think very taboo of death and injury, more so then things like rape and theft (in many Western European and North American countries). I can't stress enough that death is one of, if not THE biggest taboo in most Asian societies. Like previously mentioned, because these games are in arcades and arcades are where a lot of kids spend a good majority of their time, it's not marketable to the parents giving their kids game tokens to go play games that are high in gore content. Furthermore, the original Melty Blood wasn't in Arcades, where the public commercialization is happening. I'd imagine it was decision just made by the developers to not promote that level of content when the game took off.
As for other long-standing fighters, over the last decade there has been a big backlash politically and from the older generations (who hold the most power in Japan) about large amounts of blood or gore in public commercialization. This is not about freedom of speech or expression, as they are very common in private works, but about the commercial and public display of games (unlike many cases you've heard about in the United States). So, the developers worked with the government to keep releases at a certain "level" for public content. I think it's fair.
Unfortunately, because console releases are just ports (and possibly small game updates), you miss out on those things.