I was pretty much equal with Luster in the Battle Challenge for the longest time, and I did pretty much the exact same things. I only finished higher because I had a bad feeling on MGS4/SotC and decided to bank 10 minutes before the match.
So, here's my take on the battle challenge. Like everyone else, I'll say that you are certainly allowed to bank, but you have to be careful when you are banking. One aspect is obviously the match being debatable, but more important maybe, is looking at the matches after the one where you might bank. If the next 10 matches contain 4 debatable matches, chances are poor that you'll make it through the entire stretch safely, so you should probably bank on the first debatable match and play it safe. However, if you have an isolated debated match, followed by 15 easy matches, you'll just have to play it risky, as your wins can get that much bigger.
I'll probably try to get to Phoenix/Gordon without banking, and then put my 21000 in the bank. The next match is Alucard/Shepard which is also debatable, and Chell/Ness, Pac/Crash and Siegfried/Ramza are all really soon after, so that's too many risky matches for me to be confident in.
Also, I'd say don't bank anything less than a 10-match streak.
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