This thread is getting a little intense, but I'll add some thoughts of my own on a few issues.
First, please stop saying that "We're reaching the bottom of the barrel at this point" when it comes to Nintendo newcomers. If by that you mean super-famous Nintendo characters, remember that even if you want to delude yourself that we barely have any left (I can name King K. Rool, Dixie Kong, Ridley if Sakurai changes his mind, Toad, Waddle Dee, the Inklings, and Animal Crossing characters like Isabelle or Tom Nook off the top of my head), a character's lack of overwhelming popularity doesn't mean they won't be interesting or fun to play as. There's a veritable treasure trove of Nintendo characters sitting around in older games that would be, if nothing else, fun and interesting to play in a Smash setting, even if your grandma or second cousin twice removed doesn't recognize them. Aside from the usual retro (by which people generally mean "NES days" for some sad, arbitrary reason) choices like Balloon Fighter or Excite Biker, there are tons of characters from Nintendo's other systems, like Ray from Custom Robo, Isaac from Golden Sun, Chibi-Robo, Saki Amimaya from Sin and Punishment, Muddy Mole from Mole Mania, Dillon from Dillon's Rolling Western, Wonder Red from The Wonderful 101--I can go on and on. Still, the point is that even if many of you haven't heard of these characters or haven't played their games, you're still selling them short if you think they wouldn't be great additions to a Smash game. Smash isn't purely an All-Star driven series, which has been proven time and time again.
However, this leads to my second point, which has been brought up before--if the roster keeps growing at this rate, it's undoubtedly going to become unsustainable. I have to grudgingly agree to this. I had a feeling the roster would grow too large after a while, and people have different thoughts on how Smash might go about solving this problem. All I'll say is that Sakurai has a drive to want to give people satisfaction, even if his definition of satisfaction can be a bit twisted sometimes (putting Ganondorf in Melee but making him a Captain Falcon clone comes to mind--he probably assumed people would be ecstatic at him being playable at all, rather than HOW he played as well). You can see this by how, in both Brawl and Smash 4, Sakurai tried his hardest to put in as many veterans as he could alongside his 14+ newcomers, but, if you notice, left out the veterans he was under the assumption the players would miss the least (several clones from Melee, a Japan-only clone and a second clone from Brawl, a mature third-party character, Pokémon Trainer's two less-popular Pokémon, and a retro character that has only appeared in one title back when the NES launched). Aside from Mewtwo, you rarely see Sakurai cut anyone super-famous or super-beloved, and does his best to bring all of the supposed important veterans into the new games.
This is going to sound controversial but--Smash should cut a lot of these well-known and beloved veterans in the next game.
My reasoning is actually pretty simple. Smash 4 is pretty darned fun. Unlike Brawl, it doesn't feel too floaty, and unlike Melee the balancing across the Smash 4 cast is, although still not ideal, a big, BIG improvement over past Smash titles. What does this mean, you ask? It means that, should the next Smash cut a ton of my favorite characters from this game, I'll have no problem coming back to this one to play the characters I missed. With Brawl, it felt weird to play, but even though I found Melee more fun I still went back to Brawl because I liked its roster a LOT better than I liked Melee's. However, since I find Smash 4 more balanced than Melee and less floaty than Brawl, I've had the most fun with this installment. I don't have any real problems with its gameplay, and the roster, though not perfect, is pretty great as-is and only got better with the DLC characters.
As a result, whatever the next Smash decides to do, should it cut tons of veterans in order to make room for its many newcomers, I can in good conscience let myself enjoy it while coming back to Smash 4 from time to time. I know many would be heartbroken to see so many beloved characters miss out on the next Smash, and I have no doubt, if it does cut a lot of characters, I'd feel sad too. But to give an example, let's look at Nintendo's other non-Splatoon, non-Pokémon super popular multiplayer series--Mario Kart. I love Mario Kart 8. The race tracks are really cool, the music is great, and it's been fun to play in every installment of the series. The roster, though, isn't "updated" each game. There are many additions, but many characters also don't make the cut every now and then. Diddy Kong, for example, was in Double Dash!! and Wii, but missed out on DS, 7, and 8. Still, I don't cry too hard about it because I love 8 AND Wii, so if I ever feel like it I can always come back to Wii to get my Diddy Kong on.
All of this is to say that I'm worried that Sakurai is trying too hard to make each Smash game an "update" of the previous one, in terms of the roster. He's seemingly not too keen on letting individual titles in the series stand on their own, with their own long-lasting appeal. It's probably why, as I said earlier, he tends to cut characters that weren't super-popular or unique for the next game, giving the impression that he's almost deliberately culling ones he deems not that important after all to go out of his way to keep. For many people, this might seem like an agreeable practice, but this can only work for so long. The roster's gonna get way too huge if they only cut a few not-overly-popular characters for each Smash sequel while adding a ton of newcomers and bringing back almost all of the veterans every single time. I can tell you one thing will happen--the balance will suffer. Smash 4 has more than 50 characters. With DLC the number will most likely reach 60 if not outright surpass it. Smash 4 is the most balanced Smash game yet, but even then it suffers from some pretty obvious problems, like how weak regular Samus is or how irregular heavyweight characters' performances are in 1 v 1 matches since they're still balanced around free-for-alls. Even with how good the balancing team has been in this Smash, I can't help but doubt that they'll keep it up with a roster that hypothetically approaches the mid 60s or 70s for the next Smash.
It's just more pragmatic that Smash 5 would cut a lot more characters to give itself some breathing room to balance whatever veterans remain and whatever newcomers it wishes to introduce. The balance won't suffer as much, the roster can be cool in spite of the cuts, and it can still be a top-notch Smash game that they have always been. It wouldn't "replace" or "update" Smash 4, it would simply exist alongside it, in a way. In a perfect world, we'd have Smash sequels that are true updates--ones that, somehow, don't cut anyone, introduce tons of newcomers, execute them all well, bring back every single stage (and sometimes graphically update them), introduce lots of cool new stages, bring back all music, trophies, etc. while adding NEW music, trophies yadda yadda yadda. But we can all agree that that's simply an impossible and probably unreasonable dream. The next best thing, in this case, is to just let each Smash entry from here on out be different, and to let them all stand on their own.
Smash 5 might just be what I described--a Smash game with tons and tons of cuts, but is otherwise a great game with great newcomers, stages, music, gameplay, and everything else. What it doesn't have, veteran-wise, Smash 4 will still have it. And I think that's okay.
Sorry for the huge post, but I've had these thoughts for a while now and felt this would be a good time to divulge it all. Hopefully, even if you guys don't agree with me, you guys at least entertained it or found it interesting.