In line with the old idiom, "no news is good news" and this means that Geno has once again skirt by a credible leaker not having negative comments about them, especially when others including Vergeben have claimed to have heard something on the positive end of the spectrum. The DQ comments were fairly neutral too so, on that note, this wasn't super threatening unless you're a Paper Mario, Banjo, or Advance Wars fan.
I already assumed that Banjo was out because Steve is almost certainly in at this point, and I doubted that there would be two Microsoft reps. The best case scenario would be if, somehow, Steve was a sort of "gateway" character for them to get Banjo in, but realistically, Steve is going to sell more anyway, so that's not really an appropriate way of looking at it.
I gave up on Advance Wars even tho it deserves a rep. Paper Mario also deserves to be in, but there's no new game to advertise or anything. Ironically Geno is one of the few fan favorite characters that I actually think still has a chance. Him and Bandana Dee. The fact that Hitagi hasn't heard of any first-party DLC characters makes me think that he only really knows about three of them (the Square Enix character, Steve, and possibly Katalina). Because I can't see all five being third-party, even four is kind of a stretch. So I think Bandana Dee's chances, as the #1 Japanese pick on the ballot, and with Nintendo picking the characters, are actually quite good.
The bigger question is about Geno. He's the easiest for them to get the rights to, but he doesn't really advertise anything except for the SNES Mini, he would be a fan appeasement character all the way, and I'm not sure Nintendo would opt for that in their negotiations with Square. But I honestly don't think that Hitagi "not hearing about him" disconfirms him in any way, Square always keeps this stuff close to the chest, and any of the ones he's heard could have been leak bait easily. Which also means Sora still has a chance in my eyes, even tho he would be a licensing nightmare but whatever.
I'm still rooting for you guys and Geno. Never give up hope, remember that Sakurai has openly supported him as playable.