I would argue that the mere fact of having punches/grabs with such distances would already fill a good chunk of the moveset , and be hard to balance. On top of that , while every character has their ARMS of predilection , you can equip any ARMS to any character , you just have to unlock them.
Character specific gimmicks (SM comeback mechanic , RG multiple jump/air-dodges , and so on) would be hard to balance if they are on top of the character's range with their attack.
Having a special that change your current ARMS would be a lot already , considering they all affect your speed , have different arcs , and different elements tied to them. Or they could make it that each attack is tied to one specific ARMS.
(Here's a list of all the ARMS btw :
https://i.imgur.com/yTsT16P.png )
My point is : The universal mechanics of ARMS are already very hard to translate in Smash without being broken ; No character in Smash have melee attacks that could reach you accross Final Destination. (Some would say the Belmonts , but they have a weapon and projectiles , it's not a Melee punch)
On top of that , you already have a very long list of ARMS to choose from with ton of different effects. (Straight forward punching glove , shield , a punch that separate in 3 smaller attacks , a big blue ball that bounce on the ground and cover your screen in paint , ect...)
Balancing the simple universal mechanics of ARMS in Smash is already very complicated , so if you have to add on top of that character specific gimmicks , it's going to be a nightmare.
The universal mechanics of ARMS are enough to make a full moveset in Smash in my opinion , hence why you could have alts of other characters , as long as they have similar proportions to fit the hitboxes/hurtboxes and what not. They proved that different alts can have different idle animations or taunts (
) , so they can go the extra step and give each character their personnality thanks to that. (They could even give every alt theur 2 OG Victory screens from ARMS)
They proved with Joker that they can heavily tweek victory screens (FS victory screen , changing the environnement around him during his victory animation) , and they have a DLC budget , so I think they can do that.
Also , slight nitpick :
All the koopalings have different personnalities. Just play any of the RPGs , watch any of the Mario cartoons , or just something as simple as the first manuals of SMB3/W. They however all fit a role , being the "2D mini-boss/boss" in most 2D mario games , but still have their own personnalities.
The main reason they are alts is because Bowser Jr. moveset is
fully based around the koopa clown car. So you could technically shove anyone in there , and it wouldn't change much. Also , Morton is twice as big as Junior , but he's litteraly the same size as Bowser Jr. Same goes to Iggy , the tallest Koopaling , who has the same size as Bowser Jr.
Tweaking body sizes is fully possible , but I agree that some ARMS characters would be wack if they did (Helix with his gooey body wouldn't fit , as an example).
But yeah , junior prove to me that you can take the basics of something to represent them , and add different costumes to give extra fanservice.