Imo there a quite a few reasons to put Medusa in over Hades.
- it's another female character
- it's the promoted villain of Kid Icarus
- it would be the first female villain playable in a smash game
- Medusa's boss fight showed more moveset potential than the fight against Hades
We already have a pure evil guy in Smash in the form of Ganondorf, so I don't feel like Hades would add much to the roster. Medusa on the other hand is the bad-*** evil chick that Smash never had, so I'd put her into Smash any day.
I'm all for having Hades as a boss fight though, along with lots of sarcastic smash jokes.