First off, what difficulty do you have it set on? Practice at a slower pace at first and work your way up. It is harder to parry a CPU because it is pretty much programmed to know all of your moves. I suggest not parrying as much as you would online, it's easier to catch a person with a parry rather than a CPU. Also, just try to make sure your'e not stuck in a corner, so pick a character that works well at mid range. If you find it hard to beat a certain character during arcade mode, but still manage to win one round, be sure to save all of your breakers for the last round the next time you have to fight him (or her). It's better to allow the CPU to have a round than to win a round but be out of breakers for your last try. Use lower attacks, and you have one of two options. Be extremally quick, with fast attacks and in your opponents face, or slow down a bit....attack a bit and back off. And that means instead of going for a long combo where you might get the first few hits off, and the CPU uses a breaker and takes advantage of that to do a combo on you....do a high-low hit and step away, making sure you are constantly sidestepping. I hope this helps.

I made a KAF and had to perfect him... and he Obliterates on Medium.

I usually go for the things that juggle, and throw in air in general.. and do tons of air combos.. ( I LOVE air combat ) :)
And ya... thats basically my strat and it works gr8