A few tips:

1. Use http://cs2d.org/validate/ to clean up your code before posting just to make it look a bit nicer.
2. Highlight your code and click on the 101 button (preformatted text) for it to display as code.

Here are the changes that I made: Line 11:

if action == 1 then

to

if action == 1 and player(id,'team') == 1 then

Line 53:

msg("©255255255Press F2 to use KAMIKAZE!!!")

to

for i=1,32 do
    if player(i,"team") == 1 then
        msg2(i,"©255255255Press F2 to use KAMIKAZE!!!")
    end
end

So the final code:

function initArray(m)
    local array = {}
    for i = 1, m do
        array[i]=0
    end
    return array
end

kamikaze=initArray(32)

addhook("serveraction","kamikaze_button")
function kamikaze_button(id,action)
    if action == 1 and player(id,'team') == 1 then
        if kamikaze[id] == 0 then
            kamikaze[id]=1
            parse("strip "..id)
            parse("speedmod "..id.." 25")
            msg("©255255255"..player(id,"name").." Uses KAMIKAZE!!!")
        else
            return 0
        end
    end
end

addhook("second","kamikaze_timer")
function kamikaze_timer()
    for i = 1, 32 do
        if kamikaze[i] == 1 then
            msg2(i,"3@C")
            kamikaze[i]=2
        elseif kamikaze[i] == 2 then
            msg2(i,"2@C")
            kamikaze[i]=3
        elseif kamikaze[i] == 3 then
            msg2(i,"1@C")
            kamikaze[i]=4
        elseif kamikaze[i] == 4 then
            msg2(i,"EXPLOSION!!!@C")
            parse("explosion "..player(i,"x").." "..player(i,"y").." 100 9999 "..i)
            parse("killplayer "..i)
            kamikaze[i]=0
        end
    end
end

addhook("movetile","kamikaze_effect")
function kamikaze_effect(id,x,y,tilex,tiley)
    if kamikaze[id] > 0 then
        parse("effect \"fire\" "..player(id,"x").." "..player(id,"y").." 10 10 0 25 255")
    end
end

addhook("minute","kamikaze_msg")
function kamikaze_msg()
    for i=1,32 do
        if player(i,"team")==1 then
            msg2(i,"©255255255Press F2 to use KAMIKAZE!!!")
        end
    end
end