How do you write your characters in combat?
It depends on the character. Some people will write a PC who has a lot of abilities and skills. I usually have them specialize in a particular area like telekinesis or telepathy, then give them weaknesses or gaps in their knowledge of other abilities. So, someone who is a telepath specialist may not be good at lightsaber combat; they compensate for this by distracting their opponent with illusions. This can come across as a bit more like a comic book superhero than a Jedi or Sith, but it's easier for me to keep things balanced and I overall find it more fun.
You can also take inspiration from video games. If you've ever played an SW game where you play as a Jedi, Sith, etc, you can copy their style of combat. This can be tricky, however, and requires a good grasp of the differences between video games and RP. A video game is often a power fantasy for the player, but with RP you have to be cooperative and fair to the other players.
What is your advice on 'downplaying' or 'overpowering' characters?
I touched on this a little bit in my previous answer, but it is worth noting that your observation about most characters on the site being ridiculously powerful is correct. Some people respond to this by making their characters just as insanely powerful. I don't like that approach, I find it boring and phony. I prefer to get creative and give people things they don't expect - and I've found that a lot of people enjoy being surprised in combat. It certainly keeps things interesting.
You do have to be careful, though. Whipping out an obscure Force power that only a handful of characters in canon have ever used is a bit goofy. But bringing a gun to a lightsaber fight or writing a character who knows only one Force ability and can find ways to use it creatively can be a lot of fun, IMO.
What do you think is a good etiquette for writing fight scenes so that its enjoyable for both parties?
I wrote a post about this a while back, if you're interested. Basically, you should strive for clarity and simplicity. Avoid technical language, don't have your character do more than 2 significant actions per post, keep your posts fairly short and to the point, etc. Take hits, do more with less, and don't obsess over stats. Oh, and make sure your fight has a purpose and your character is motivated to be there.
When do you decide which side loses eventually if both are significantly evenly matched?
Unless you both agree OOC on the outcome, you basically keep posting until one or the other decides to lose. Most people won't drag out a fight; invasions and other public threads have a time limit of a couple weeks, and even if you're in a private duel I think the average writer has a good grasp on when the drama has reached its peak. I consider a willingness to lose to be the mark of a good writer. I've been in duels where I had my character lose or even die. Weirdly, I've never killed off someone else's character, but I have defeated a few opponents.
I've also had experiences where it was clear the other writer was not going to even consider losing. These fights usually suck from the very start. They'll write their character never taking hits, describe your character's actions in a demeaning way to make you look weak or incompetent, etc. In those cases I usually just end the fight early by retreating. This gives them the power fantasy they want - and it allows me to never write with them again, lol.
Sometimes, lol. I'm not at all consistent with my use of dice rolls on the site, but when I do roll it's usually because I'm in the mood for a little chaos. I used to be a lot more controlling when it came to my characters' narratives and where they would go. Nowadays I'm more likely to just go with the flow, and that includes introducing the D20 as a randomizer.