Hmm, I've never played project M, so i can't give any feed back there...
MUGEN's pretty fun, especially if you go into it purely for fun or for laughs. The only Mugen game I ever played was called Everything VS. Everything. It came with one stage (with room for however many more you'd like) and about 8-12 characters + a FUCKLOAD of empty slots to add more characters you can find online (think 200-300+ slots open for more fighters)
Mugen characters range from balanced, to OP but still fightable, to broken via OPness or as a joke. Some characters I still fondly remember:
Tom Hanks - unwinnable against, and he shouts one-liners with boxarts for various Tom Hanks movies as his projectiles (he can also summon Hooch from Turner and Hooch)
Winnie the Pooh - You'd think WtP would be fuckin horrible, but instead he's quite the fighter
Green Power Ranger - Pretty balanced, awesome moveset
Beehive/Wasp Nest - A Bee's nest, that when struck a few times, explodes into a shitload of bees that kiill you. Made as a joke.
The funniest match I ever saw was a CPU match of Winnie the Pooh Vs. the Beehive.
As for Brawl, I don't plan to play Project M, as I can just as easily set up different characters, stages and songs bit by bit yourself like It's MUGEN on crack (but more balanced than Mugen). Plus using a cheat file + Gecko loader, you can make the game do all kinds of great stuff, like being able to have full camera control when paused, or being able to finally overlap pieces in the stage creator, which when coupled with an infinite stage pieces cheat, allows to make whatever stage you want.