How effective a character is in competition does not necessarily reflect how good their concept and design is, but how effectively they can execute the game plans their character is meant to have can reflect on how overpowered or underpowered said character is.
This is really a very subjective thing, but I believe that good character design for a game is not about how strong they are in competition, because it's not necessarily the case that the best characters are also the best-designed. Rather, it's about giving a character meaningful strengths and weaknesses that make them rewarding to play. Given that different people have different preferred playing styles/hopes for how they want to play, it means that having different types of characters is also important.
Ganondorf is a much worse character than Sheik, but Ganondorf also represents a completely different play style. The matchup is imbalanced, but that doesn't mean the idea of a "hard reads heavy hitter" is guaranteed to failure. In fact, I think they're purposely very hesitant when it comes to buffing Ganondorf because they don't want to end up trivializing others in the process or removing the heavy hitter style.
I think
NairWizard
's exercise is meant to help us consider the following: Buffing a character to be the best character in the game isn't difficult. You can just go, "Uhh, game & watch down smash KOs at 50% now and also bucket does a bajillion damage" and be done with it, but to have characters be made "viable" without necessarily ruining their archetype is more important as a thought exercise.
As for Palutena, her character type to me is basically "shenanigans." She's designed with a mix of weirdly overpowered and underpowered moves and properties, and she's supposed to be there for players who want that sort of eclectic mix. She has an invincible bair and dash attack so she can challenge any attack. Her tilts are terribly slow, but their hitboxes can't be interrupted (this especially makes for interesting interactions with Witch Time. Her Reflect is unblockable for some reason! She has this gigantic pillar-of-light up smash too. Can you effectively master your combination of gimmicks to the extent that they can cover your weaknesses?