Shaya's comment reminds me of a similar analogy: to wit, the All Blacks in rugby. The All Blacks (the official team of New Zealand, if you're unfamiliar with the sport) have consistently dominated the game since 1903: the team has won over 70% of their official test matches, beaten every other country they've played (the only international team in the world to do so), have only ever been beaten by five other countries (Australia, France, South Africa, British and Irish Lions and an invitational World XV team comprised of players from different countries) and held the position of the top team in the world longer than any other team in the history of the game.
In short: the team are very, very good. The most famous victory against the All Blacks was in 1978, when Munster (coincidentally my home team) beat them 12-0. In Smash terms, it'd be the equivalent of a mid-level player beating ZeRo 3-0 in grand finals at a major.
To this day, songs and stories are told about this match. It's that anomalous. But it proves that it can be done, and that a dedicated goal to aim for forces players to do their very best.
The point of my comment is that the All Blacks, far from ruining the game, actually embellish rugby: every rugby team in the world dreams of beating the All Blacks. It's a massive achievement for any country to defeat them in an international event, which spurns on every team to do their best and play harder. This competition is good for the sport. Everybody does their best to beat the All Blacks, because that's the ultimate test of efficacy in the game; at the same time, the All Blacks know everybody in the world wants to beat them, so the team constantly train to improve themselves in order to stay at their best.
ZeRo won't ruin Smash 4 by being the best. At the same time, he won't suddenly cease to be the best just because he gets beaten in a tourney. As mentioned earlier in this thread, when ZeRo is beaten consistently by other players, then he will pass on the mantle to another player. Then that player will become the opponent that every tourney-goer wants to beat, then the next player, etc.
And, most importantly, do remember that the game is very young. I'd wait a couple of years before we proclaim that ZeRo is undefeatable and stagnates the game.