Would you prefer a 2d scrolling shooter using the mouse to aim (Heli attack style http://www.miniclip.com/heliattack3.htm) or fixed angles (straight, up/down like Alien hominid http://www.newgrounds.com/portal/view.php?id=59593). Both game styles are similar but Im not sure which I should go for.

Allow both so users can pick which they like? If you find it too easy one way make the enemies harder or more of them etc.

with mouse: if you want the player will have 'full control' on the gun, like in FPS games for PC.
without mouse: umm..retro style, or making the game harder or more challenging?

I was thinking of going with both initally but then I thought that this might hinder game design. For example, someone could be diagonally upwards which would be fine with the mouse, but not so kind to the limited version. I was hoping to go retro with that, but since the game has lots of physics interactivity, Im not sure it would work so well. I'd just like to see your opinions.

Use whichever fits in with your game the most. I disagree with the "use both" comment, because shooting style is really something that a lot of other things are designed around. Either design your game to use the limited keyboard aiming scheme or just go completely with the mouse.

IMHO in a side scroller a mouse controlled aiming system isn't that cool. Without mouse you can make the limited aiming control part of the gameplay. I also think that the mouse & keyboard control is more complex than the controls of a side scroller should be.

I really enjoy side scrollers that use both mouse and keyboard control. Using the mouse to aim is perfect, you don't want to frustrate your players with a clunky keyboard aim. If you do go with keyboard aiming just make sure that the targets are either in front of the avatar or above - so no finiky aiming is required.

If you haven't played abuse have a go now.

Ah yes abuse! Brings back memories :D. That game was absolutely brilliant. IIRC this game did very well when it came out. Im off to play a bit more :D

Just to derail a bit but interesting tidbit - the company that made abuse went on to develop Golgotha but they went bankrupt and the graphics assets (at least, not sure about the code) are now public domain.