Basic training mode configurations:

Magic circuit "Unlimited"(this is in Battle Settings, not Enemy Settings): Unless you're practicing against a Half Moon character or want to test meter gain, you should generally give yourself infinite meter to make combo practice easier.

Enemy defense "All guard", enemy defense type "combo": The dummy will get hit normally but block if they fall out of hitstun. Good for practicing combos so you don't keep going if you drop it.

All guard, enemy action "recover A", crouch: The classic. This will cause the dummy to mash 2A out of blockstun as quickly as possible, allowing you to test frame traps and fishing for counterhits.

Jump, counter hit (first hit)(this is in Battle Settings, not Enemy Settings): Melty Blood air counterhits put the opponent in hitstun until they hit the ground, giving a free combo. Every new player should work on mastering aerial counterhit confirms with this setting.

All guard, enemy defense "random": Use this to practice hit confirming. Do a standard pressure string and continue into a combo if it hit or a blockstring if the dummy blocked. Very essential.

Examples of more advanced training mode configurations:

All guard, down recovery "random 2": Use this to practice throw tech-chases if your character has a throw that can be teched. This will cause the dummy to tech in a random direction or sometimes not tech at all, so you can practice all four scenarios.

Throw recovery "random-random frame", enemy action recover A/B/C (pick a fast, long-range normal on the dummy for this): Use this to practice reacting to throw techs. This is a scramble that can happen often depending on your playstyle and character, so it's useful to practice reacting to throw techs and quickly choosing a good option.

(against H-moon opponents)All guard, recover D: Practice your anti-H Moon shield OSes. By setting the dummy to "All shield" and "recover A", you can practice again Crescent shield mash-outs as well. For C and F Moon characters that use special moves out of shield, you may have to test recording yourself as the dummy or using the dummy's Replay Type "Recover".

The dummy can be configured in many ways. If you want to learn to block a certain mixup that has several different variations, hide the dummy timer in Dummy Settings "Replay Time Display", record all of the variations you want to test against in different Dummy Recording Slots, set the Dummy Replay Slot setting to "Random", set the Enemy Status to "Dummy", and try to react to or OS the different mixups. (Hiding the recording timer will prevent you from cheating by looking at the timer to differentiate the strings.)

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"Attack Display" information, because why not:

Combo: The number of hits in the combo. The number in parentheses will stop counting up if the combo is Invalid (if you set the dummy to not Recover when possible). Note that most characters take different amounts of damage based on the amount of health they have remaining (see the Mizuumi wiki in the section "Defense").

Damage: The amount of damage the combo actually did. The number in parentheses is the amount of damage the combo would do if there was no damage proration (Correction or Reverse Penalty) present.

VS Damage: I believe this is the amount of unrecoverable damage the combo did, with the difference between this and Damage being "red health" (recoverable by Heat).

Correction: The current amount of damage proration. All subsequent hits will have their damage multiplied by this number, and most moves will cause it to decrease causing later hits to do less damage. Other factors like hitting OTG or throws can cause this number to decrease as well.

Reverse Penalty: Proration caused by reverse beats. Unlike Correction proration, this value only deteriorates over time once you stop Reverse Beating and will not automatically reset for every combo.

Max Combo: The number of hits in your most damaging combo this session.

Max Damage: The highest damage you've done in a combo this session.