It is advisable to remain still during the battle, and let Pug approach you. You can let go of the arrow keys and concentrate only on J and M.
Once you engaged in combat, familiarity with Pug's "timing" is essential for victory (i.e. Practice and don't forget to Save and Load)
Prepare for a long fight: Pug will undoubtedly block some of your punches, and you will miss some of his. The best way to get him is to punch him upon his approach, while Pug's robot is going through with the walking animation — Pug is likely to miss his opportunity to block and/or punch you back.
Strategy: "Almost Cheating"
You will not need to use J and M buttons for this fight.
In the very beginning of the fight, move downward a little and walk towards Pug. Stand close on his bottom-left, and move along with him to the right while keeping your relative position.
If you have followed the guidelines correctly, Pug will punch the air, draining his energy. As you reach the right-most edge of the screen, Pug will tip-toe in one spot while punching air, ultimately resulting in his defeat. In Mortal Kombat terms this constitutes a "Flawless Victory." (Although you will waste some of your energy supplies on walking.)
If you aren't fast enough on your approach, Pug will walk downward to face you. The key to success is a very short walk down so that Pug remains above you and you outside his reach. If you continue walking to the right after Pug had stopped moving, he will turn towards you, forcing you to battle him in a vertical fight. If you keep your position as "very close proximity down and to the left of Pug" at all times, you will achieve victory without having to throw or block a single punch.
Rules & Controls:
Movement is achieved with the use of Arrow Keys while the actual fighting is controlled by the keys J (for Punch) and M (for Block). Every wasted movement drains your energy (shown in a green bar on the left top side of the screen), and every successful offensive or defensive move will replenish some of your energy supply.
Multiple Strategies:
Although "By-the-Book" approach is listed here, the "Almost Cheating" approach bears better odds of winning, though it may take a few tries to understand. Since it takes advantage of poor AI in the game it is a very cheap method of getting out of fighting Elmo. The moral implications of taking advantage of poor AI is left to the Reader's discretion.
