Hey this is somewhat misinformation. It's been said elsewhere, but not here, but Hosoyamada is perfectly fine with this (he was the one who wanted it in the first place; ergo, he would be happy to allow Sakurai the use of Puyo content in Smash). He also isn't the creator of Puyo Puyo, like, at all. He's just the director of the games.
And, not only is it old, the people at SEGA who rejected this may not even still be there, or may have changed their minds. There's also the fact that Smash is not only a big money resource, but also, it's a lot less of a violent brutal sport as much as a whimsical slapfight. We also have no idea how long ago that cancellation was; could be anywhere between that year and back in 2016, or 15, or even 14. Hell, this could've been back in 2006, that's how long Hosoyamada has been in charge. (If Ayumi knows how long ago it was, I'd be more confident in this, or it may actually remain valid.)
Lastly, in Puyo Puyo Chronicle, the final boss of that game directly attacks the character Ally physically in the cutscene after they are defeated. While it isn't animated violence due to the nature of those cutscenes, it's much more violent than anything in the series before then (even in the Compile era). So they let that pass despite there being a supposed "ban on violence" in Puyo, which is kinda strange.
So thanks for the apology, but I doubt it's necessary. I'm pretty sure Arle is still in the game.
But anybody who says that she's not FP5 is probably right anyway, I always expected her to be post-pass once that hit. She would make sense (breaking a fan rule, being a disappointment relative to the earlier characters for most people) but honestly I just don't see it.