I dunno, but I've felt like it does before. Someone test this with TAS please?
In Melee, DIing to the side DOES help you survive attempted vertical KOs, but in Smash64, it does not. Why? The fact that you can affect your trajectory in Melee, and not in Smash64, is the key.
Imagine that the stage is a rectangle, with the sides representing the blast zones. The shortest path from one point to another is always in a straight line, so no DI causes you to fly to the ceiling in the most efficient way possible:
In Melee, you can affect your trajectory, although you can't affect the distance you travel that much. However, the corners are the furthest point away from where you start, so DIing straight left or right to try and go to the corners is the best way to help you survive:
In Smash64, you can only Smash DI, which affects where your starting position is before you are sent flying, but doesn't affect trajectory. This DOES NOT help you survive because it is still the same distance to the ceiling:
I'm in the air, someone hits me up. Let's say I have 10 meters above me and then I die. The knockback of the hit of the opponent is exactly 10 meters. This means I'm going to die. Now if I DI down, at the beginning, I'll be a bit below my initial position so I'll need 11 meters to die (for example). Will the knockback have changed to 11 (thus the hit still kills me)? Or will it remain 10 (thus I won't die)?
This is correct, as far as I know. However, IIRC DIing up and down is more difficult than left or right for some reason (I think that's what antdgar said). It will probably only a small difference, unless your DI is insane. That small difference might be the difference between surviving and losing a stock, though! Still, your best bet is to try and DI into any nearby walls or ledges and reduce the knockback. You might as well DI down if none are around though.
I didn't test all this or anything, but it seems to be logical to me :3 Hope this helped.