I get the feeling that Microsoft is testing the waters with Banjo more than anything else. They´re not dumb, they know the mascot is beloved among 90s gamers, and they wanna earn goodwill from the gaming community after the catastrophe that was the Xbox One.
Also, it should be noted that current Rare is nothing like old Rare, even the staff is totally different. Similarly, the people working within Rare have changed. For as much as people like to throw shade a Microsoft for Nuts and Bolts, a lot of that also rests on Gregg Mayles´ shoulders. Simply put, the guy generally doesn't wanna work on a classic Banjo-like game anymore. Call it old age, call it getting jaded, whatever the case might be, IF a new Banjo game ever gets made, it most certainly won't get handled by Rare. That said, I personally place more weight on a remake of Kazooie and Tooie coming before a Threeie ever gets made if I'm perfectly honest. Doubly so if we consider how well the Crash Remakes did. It'd generally take less effort to make, it'd be less risky, and it would capitalize well on the nostalgia. Plus, you wouldn't have to worry about making sure the game is well designed since you'd just update what's already there into HD.
As for Banjo in Smash, out of any possible Microsoft-owned character, Banjo has the highest odds simply due to the fact that it's a personal wish for Phil Spencer himself:
https://www.ausgamers.com/features/read/3564591
Making that three times he's said he wants Banjo in Smash now.