This is probably going to sound horribly rude, but I'll do my best to not be so as I have nothing against MineCraft other than it's not my thing.
When I say 'MineCraft would be better as a stage/accessory' what I mean is with representation in Smash.
Think about this for just a moment: why do people play MineCraft?
Is it for Steve? Is it for Alex? Is it for their story or their character arc or something that makes them unique?
No.
People play MineCraft to build awesome stuff and unwind. They don't play it for Steve or Alex or anyone else for that matter. The minute they can, they throw on a skin to replace the default. They pick something that expresses themselves better and almost no one leaves the default 'Steve' or 'Alex' on for longer than they have to. Why? Because it's not about Steve or Alex, it's about MineCraft. Don't just take it from me: someone who works on MineCraft came out and said that themselves, someone in a higher position. Even people who WORK THE GAME don't think Steve is a good rep for MineCraft in Smash.
It's similar to my issue with Undertale: I think it's a genre that is difficult to represent in Smash without taking extreme liberties that don't really do the franchise justice...or representing it with a stage/AT where there is more freedom and liberty for proper design. MineCraft, despite all it's updates, is primarily about crafting. It's in the name! You build stuff with the materials you gathered, and then you gather more materials to make more stuff. You slowly make more and more grandouse stuff until you fill every inch of space you could want, and then you start a new world and do it over again, all while exploring and finding new things up until you've discovered all there is and wait for an update. There is some minor survival aspect and there are things in the game that suggest there is more going on, but all the story elements are really left to other forms of media or other games. Correct me if I'm wrong, but didn't the stuff that had characters talking and much more expanded lore happen AFTER Microsoft bought the IP and marketed to children? Like I said, I'm not saying there was no story, but it would seem there was MUCH less before MS showed up.
To compare to Geno (since this thread IS about him, fun fact), here is a list of things Geno has done:
-Geno has had dialogue in his own game
-Geno has a personality
-Geno has had character growth (albeit more subtle and minor than other characters)
Geno has something that allows you to become attached to outside of gameplay. This doesn't make him better than Steve, but it does show that Steve is meant to be nothing more than an avatar for the player. Personality is really important, so I would feel like if MC HAD to have a character, I would pick the most well-known face from any form of MC media that actually talks and has character.
Even so, I suppose this doesn't have to happen, and worse I feel it wouldn't represent the OG MC fans. In this case, as
EricTheGamerman
mentioned, Villager is a good example of taking a 'blank slate' avatar type character and making it work, though I would argue Villager has more personality than Steve does. That said, I feel like much of what Steve could bring has been done in some way, similar to the troll video that modded him over Link. If anything, I fear he might end up like Hero, where the only really unique thing about him is one single mechanic tied to roughly one move and it would be "poorly balanced" as the kids love to cry about nowadays to make up for his general weakness. Even so, MC isn't about fighting...though I suppose Animal Crossing really isn't either. And I'm sure there are things you can do in MC other than building that could make Steve unique that I don't even know about...but that said, I would have said the same thing about Villager before...and he turned out okay...
I guess I should settle with this: I don't think it's impossible for Steve to happen, but rather I think the IP would be represented in Smash more faithfully with a crazy stage that evolved much like the Super Mario Maker stage, but with a bunch of different players with different avatars building stuff both in the background and in the foreground kinda like Pictochat, but MC style. You could have Creepers and Endermen doing things, Skeletons and Zombies show up, and maybe an interaction with the stage like Midgard where you can find diamond ore by breaking blocks (think that one Dream Land stage) and once one person gathers enough pieces to make the diamond armor and sword, Steve comes on the stage wielding them and fights for a while like Flying Man! Then you can have Steve as a costume considering...he's just the default costume.
I'd say more, but I feel like
Ze Diglett
covered it: people are at a stage where they are convinced that only a character can do the franchise justice in Smash when a stage or some items and an Assist Trophy could actually do it better. In some cases, they really do allow more to be done, but in other cases it feels like they limit them too much for whatever reason (Shadow is a one-trick pony, Isaac only uses the hand, etc).
I just want you to know that I'm not against Steve, and that if he does show up as a costume, that I understand how you feel. Us Geno Bros have been there, and it may not feel good enough. In fact, it really may in fact no represent the franchise well, like how Mii Gunner really doesn't rep Geno well at all. Simple said, not every franchise would find a character as the best form of representation.