It sounds like Byleth was supposedly chosen somewhere from late 2016-early 2017 to fill in the gap that the previous character left, and then scrapped later because they couldn't complete the extra character anyway. I think that might be feasible, however, it implies that they worked on a character before they finished negotiations. That I believe is something they would not do, as if they fell through, then you would have wasted dev time as is in this scenario. Even if they tried to fix that by adding Byleth, that would create a wonky mess just like Roy since he would be more of a rush job, and his moveset wouldn't fit him because he's an Echo Fighter of someone that isn't even in his series.
I promise you; it'd just be a rip-off to fans of a character who was an AT.
"Oh, what;s that? You're happy Shovel Knight's in the game at all? WELL TOO ****ING BAD BECAUSE NOW YOU HAVE TO PAY FOR THEM TO BE PLAYABLE WHEN THEY COULD'VE BEEN IN THE FIRST PLACE"
That's not even the truth. They didn't get in because they were either out-prioritized, or they weren't seen fit to add in the first place. Assist Trophies are also not necessarily next in line as we've seen with only Little Mac, Dark Samus, and Isabelle getting upgrades even though there are a bunch more with relatively high fan demand. Furthermore, the base roster and the DLC roster aren't even picked at the same time, so if they decide to add an Assist Trophy character given the extra time and resources, then it doesn't really have anything to do with base roster considerations.
If they were supposed to be playable in the first place, and had enough material to become an Assist Trophy, then I'd wager they'd just finish them as DLC rather than spending time reworking the code to have the character be controlled by a pattern based AI.