I'd be interested in seeing any ideas you come up with. I'm not sure about species, myself - foxes or bears, maybe? That'd set them apart even further from Mario and Luigi, and could play into a toybox sort of theme, with "Geno" taking the role of a doll, they could represent stuffed animals. Though it'd just be a theme, they'd still be fleshy.
I'm thinking about how to 'un-Geno' Geno, while still having him be the same sort of character. A different color scheme would be a good start. Maybe actual hair instead of a hat with ribbons.
Well okay, I won't hold back on my ideas then. I could see a fox and bear working for their designs. A fox would probably be fitting for the sister, since she'd have a sneaky/sinister aura about her. We'd have to make sure she isn't too similar to Tails though, and have her focus more on chemistry/alchemy rather than gadgets. Hmmm, so much to think about...
I like the toy box theme, since there are quite a few different types of toys that can be referenced, but I worry about the theme making Not-Geno seem less unique. Geno always stood out to me in contrast to the other Mario characters and stuck with me; I would want to make sure Not-Geno has that same impact. I dunno, just my 2 cents on the matter. Still gonna keep the toy box theme in mind tho.
As for how to "un-Geno" Geno, I definitely agree with giving him hair, but maybe also a different kind of hat. Probably a slightly longer cape and more clothing in general, but still showing enough that you can tell he's a doll/puppet (Then again, maybe Geno being as naked as he is, was for the purpose of making it easier to transform his body for attacks, in which case less clothes makes more sense). As for the color scheme, we should still work some blue into his design, but a slightly different shade of blue; maybe with some silver or white in his clothing, to empathize how he's a divine being. Alternatively maybe teal as the base color, instead of blue. In the occasions we see his spirit-form, I imagine him having a glowing teal body that vaguely resembles a humanoid form.
Also as I was writing this, I thought of a new gimmick for Not-Geno when considering his spirit-form. What if his spirit-form gains the option to inhabit different doll/puppet bodies throughout the game? Each one having it's own strengths and weaknesses to suit different battle scenarios, that you can switch between at will at certain points. Basically like class-changing but he's the only character that can do it because of what he is. Or maybe his doll body is just super customizable, and you can equip him with accessories that alters how he fights, rather than just increasing his stats; giving the player the option to mix and match parts for all sorts of crazy effects (like the badges from Paper Mario). I tell ya people, there's so much you can do with a possessed doll. Nintendo is insane for not doing more with this.
I haven't even touched upon the gameplay and how we could evolve and build upon the timed attack mechanics. But if I don't stop rambling on, I'll never get to bed. That'll be all for now folks; I'll ramble more later if y'all are still interested.