a. Sheik had a knife in
official OoT artwork.
(Don't bother using the "non-canon" excuse since neither are any of Sheik's
other weapons in Smash, and they don't even
have basis outside of Smash.)
b. Sakurai directly stated on the old Brawl DOJO within the questionaire that Snake would not use his survival knife because of how knives are viewed outside Japan. In Japan, knives are seen as no different from swords in terms of fiction. Outside Japan, knives are heavily associated with gang violence and imitable criminal acts. To keep Smash as a game "fun for everyone" everywhere in the world, he kept Snake from using his knife.
The stigma isn't about the
use of the knife. It's about the
knife itself.
Same with realistic firearms, which led to certain design aspects (such as Fox's Blaster) altered from the original versions to be less realistic, or just not used at all (such as Snake and Captain Falcon, who keep their guns in their holsters at all times in Smash).