Geno is definitely quite niche and has very little legacy. Even though they are less "fitting" for Smash, all of Snake/Bayonetta/Joker/Banjo were better in these aspects. That would be quite bold to disagree with this.
edit : and I forgot the other thing that makes a "better candidate", whether or not you're a "good fit" : being the main character. These 4 are all the main character of their game/series.
In gaming as a whole, yes, Geno is a decent bit niche. But in the Mario and Final Fantasy series, both of which are among gaming's highest-grossing franchises? You'd be surprised. I've been on practically dozens of different chats with people who consider Mario RPG an honorary numbered FF title, I even remember him being quite requested as a Dissidia "guest character", and it needn't be said how popular Mario & Luigi and Paper Mario are, both of which would likely not be the way they were if it weren't for Mario RPG. You'd be hard pressed to find someone who has played any RPG Mario game and not know who Geno is at least. I mean, Alpha Dream was made up of a lot of people from RPG's team even. His legacy goes across two VERY different audiences, and those two halves absolutely make a whole.
And being the main character has nothing to do with anything in Geno's case, because the main character of Mario RPG has been in since Smash 64 :V
Geno was a better candidate 15 years ago than now. Even back then, Geno didn't make it even though he was a "great fit", that basically tells he wasn't a good enough candidate. Besides, I believe Sakurai said he personally wanted Geno, just like a fan would, not that Geno was seriously considered by Nintendo to include in the roster.
Ahhh, now I understand. Solid bait, mate.
But really though, if there was an obstacle, it was Square. Of course they'd want some of their biggest franchises in Smash before throwing in a spin-off character. It's not as if Mario RPG has been completely forgotten by them, given the remix in Fortune Street, a game MADE by them, and the Pirahna Plant rap.
We're not stupid, we obviously know there's some kind of massive hurdle Geno has had all these years in regards to Square, otherwise he would be in by now. The difference here is A. Ultimate's approach to be as much of a fan-demand wombo package as possible, to which Sakurai has CLEARLY stated there is demand for Geno, and B. Square having a much more comfortable position in Smash now.