Miis were designed around being customizable while Palutena is the poster child for customs. Miis don't need the custom fighters button turned on to use their alternate specials, Palutena does but also doesn't require any hacking or rng grinding to get her alternate specials. Also, with custom fighters turned on, it takes 2 presses of the A button to pick a non-Mii character rather than just 1.
As for Mii sizes, the 2 biggest arguments I see against it are the requirement of leaving the game to create anything other than medium height and weight Miis and the power of small, all specials allowed Brawler. The first argument can be countered by the fact that you have to leave the game to get a legal stage and quite a number of characters, many of them high or top tiers. The button added to the menu be damned, you're still going to the eshop for them. Plus, dlc stages and characters cost money while resized Miis don't cost anything. For the small custom Brawler argument, I find that this quote from MSC's "What is considered ban worthy?" video fitting: "When we ban something to early, we skew the metagame to our wants rather than what the game intended. Only when a tactics counter is to use the tactic itself should we consider to ban it." Small custom Brawler is easily the most viable of the Miis and in the current meta with tuned down Sheiks, Diddys, Rosas, Bayonettas, Clouds, ZSS' and the like compared to when we first got access to them, small Brawler may very well be too powerful. But there's no way to know unless it's allowed.
Despite all of that, I doubt there'll ever be a time where most tournaments allow fully customizable Miis. The only reason mid height/weight Miis are allowed at all is because the game comes with 6 already made. If those didn't exist, I could see Miis being fully banned. On the other hand, if even a single default Mii was small, I'd imagine small Miis would be legal right now. People would have adapted to dealing with small Brawler just as they have against every other viable character.