I don't think this is something that is a point of contention anywhere outside of the Smash 64 boards to be honest. Selective brackets, death pools, etc. have been a part of Smash tournaments for quite some time, and the trend seems to be that a very selective bracket generates the most hype and recognition for the players who made it that far. Let's use previous Apexes as an example:
Apex 2012: 318 Melee entrants -> 32-man bracket
"If you made it to bracket, you are really good at this game"
Apex 2013: ~350 Melee entrants -> 128-man bracket
"If you didn't make it to bracket, you suck"
Apex 2013's bracket was roughly 1/3 of the players and people didn't like it because it wasn't selective enough.
You all should remember that pool matches are still very important and hype. If it comes down to, let's say, me vs. Sheer in our bracket pool and elimination is on the line, that's just as significant as if it was in the top-32 (or top-whatever) bracket. Some of you may believe that in a case like this, both Sheer and I "deserve" to be in the bracket, but what this really indicates is that one of us isn't actually good enough to make the cut.
What's the reasoning behind this?
Treatment of all games equally.
I know you're all gonna balk at that statement because 64 always gets shafted when it comes to stream time and the main stage, but the difference is in the money. More viewers = more money and the other games obviously bring in a lot more viewers. As for the fact that Smash 64 is capped while Melee/Brawl aren't, don't forget that the cap has never not been increased upon being reached.
Nintendude - how is pool seeding being done? ELO ranking? And does this ELO carry over to the main bracket to differentiate those that come out pool with the same record?
The same way it has always been done in the past - a combination of past tournament results, head to head matchups, input from a few players (we asked Boom to make sure some people weren't nobodies lol), and any other metrics we have available (Elo, in this case). Bracket seeding takes pool results into account. For example, if each pool has a 1st and 2nd seed, the first round of bracket is all 1 seed vs. 2 seed matchups.