The fire ability can be found after the very first part of the Hotbeat level. The large space filled with lava/coals has a door in it. Hit the bomb block to create a space. Full or very high health is required for this next step unless the "Invincibility" code has been activated. Enter the space through the lava. You will get burned at least two times. Go through the space, and the fire ability will can be obtained inside (after defeating a few Burnin' Leos).