When it comes to Banjo’s iconic status, I would say he’s not a gaming icon, but is a Nintendo icon. Which is why his unique status makes him suitable for Smash.
That being said, Rare dropped the ball. Rather than being afraid of their IP and wanting to try something new, they should have put their energy in Banjo and have their mascot be iconic even in the transition with Microsoft. And we can’t blame new Devs—Banjo’s original creator wants nothing to do with him, and missed an opportunity to take advantage in their beloved IP.
And I do feel like there are few characters left for Smash that would appeal to people like me. After Smash 4, I felt like nothing could top Mega Man and Pac Man. And after Ultimate, I still believe that. But Banjo & Kazooie appeal to myself and my childhood nostalgia, so I feel it would be the best way to come full circle for someone like myself, playing Smash 64 in ‘99 as a kid.