Don't use it in pvp. I use it on all pve and so far no ban. Full power battle I use instant kill and it works. The only time you will get an error is when you're playing with another player. For example, co-op and raids you have to do it with no mods active except for "challenge complete"
From my experience, the mods work in raids and Co-op BUT you will get disconnect message and sometimes it will kick you back to title screen. So it's best to just do these without mods. Also when the fight begins if the first character is an ultra character then disable "install win, one hit ko, god mod" I just have to double check if it's only your ultra or opponent as well but what happens the ultra animation for some reason causes the game to freeze if you have those mods active. You can activate the mods once the intro animation is done and you're good to go. I'll test whether it's affected by your ultra or opponent ultra now when I complete the Ultra Zenkai Rush.