To what extent is "Screwing with the Rules" permissible? That is, how far for the sake of a fanfiction is it permissible to deviate from the canon material of the games or anime, depending on which is being used?
Rule of Thumb #1: When you stick so much to the original canon of, for example, the games that you're basically writing the same plot as 2910821720 other OT fics that retell the game with an OC main character, that's a bad thing.
Rule of Thumb #2: When Ash Ketchum has an IQ of 9000, that's also a bad thing.
Seriously, though, in my opinion, I'd say that these are the rules of sticking to canon, more or less. They should give you a brief outline of which way I think is too far.
1. Retconning events that actually happened in the games/anime/whatever canon you're using (that aren't contradicted later on in the same canon) without putting an AU tag on your fic is deviating from canon.
1a. Therefore, retconning is really only permissable in the cases of Alternate Universe fics or where you actually have to choose one continuum over the other because the canon itself contradicts... itself. (Case and point: Jessie and James' backstory.)
1b. Also permissable: If you haven't actually caught up with the current canon or started writing before certain points were made canon. For example, if Ash goes off to a new region and catches completely new Pokemon, and you're in the middle of an epic that you started while he was still in Sinnoh, then that's completely okay and doesn't need an AU tag (unless you want one).
2. Although Pokemon canon doesn't focus too much on characterization, each character
does have his or her unique traits that make them definitely
them. So, for example, Ash Ketchum would be the least likely person to suddenly become sarcastic and cynical, so making him such for the sake of a story would be a bit out of bounds.
2a. This goes especially for romance stories, which are notorious for disregarding this point.
3. A five-ounce bird cannot carry a one-pound coconut. Pokemon appearances, movesets, heights, weights, and 'dex entries are all canon. It's a good idea to look up what a Pokemon can or cannot do before attempting to make it do something it actually can't, possibly because it's physically impossible.
3a. However, giving a Pokemon a move it can't learn may be kosher in the cases where it's logical (as in, possible based on the Pokemon's body)
and can be explained by backstory or plot points (as opposed to doing it just for the sake of doing it -- a la Exploding Charizard).
4. Adding houses and locations to game environments is perfectly kosher, considering the fact that no city in the world has a population of five.
4a. Simply not mentioning certain places that appear in canon is also kosher, especially if you're working with the anime, which had an entire season devoted to doing this.
4b. However, drastically altering the environment (such as turning Ecruteak City into Las Vegas) is
not kosher. Analyze the canon places to get a sense of what sort of culture you're working with before doing any changes.
5. In other words, the reader needs to be able to recognize the canon people, places, elements, and events. If you change them to the point where the reader suddenly feels like they're completely new people/places/elements, then you've probably gone too far.
5a. However, don't ever restrict yourself so much that you basically retell the canon (unless that's your actual intention). In some cases, it's not possible to stick completely to canon. (For example, if Misty told the story of how Ash got the Cascade Badge, she wouldn't tell it the same way Ash sees it and may exaggerate or leave out certain details.)
5b. In other words, always try to find a happy medium.
May add a few other rules later. Or extend this list to other topics for my personal reference. This is kinda fun.