Yes I would say like a “spectator” in the audience as the poster above states, almost as if you could imagine being “Shang Tsung” spectating the event from his chair (but still controlling a fighter). With the ability to fully look around the environment in “VR mode”. Perhaps “regular mode” just had your typical camera, and it was only in the VR mode that it switched you to the sidelines.
It could work in third person too, but I agree that it would most likely be disorienting with the camera sliding everywhere. (but maybe this could still be a camera option in the menu) I would not recommend locking the headtracking out in any form as that would definitely cause some motion sickess. I also agree the framerate could be an issue on some machines depending on how detailed this would become. The reddit user eVRydayVR has a great video on optimizing for 60fps on systems struggling with it. https://www…com/watch? I don’t have too much of an issue in UE4 on my mid-range machine personally (except for with the Elemental Demo in VR, and Cave Effects VR mode)
I think if we worked on a feature like this it would blow up on the Oculus subreddit for sure! 