I think it just being an item is a good idea. By making it something you get through moves, players might start changing their style around it, and I'm sure others will find ways to exploit the game to get it fast. I've seen it happen too many times to count in online gaming, and it will spread like fire. Even if it is patched later, the game would have changes to important stuff that would change the whole way the game plays (and probably more exploits will pop up).
If it's just an item, it alters gameplay for a second during the mad-dash to it, which is great in my books. Items aren't hard to grab, and as seen in Melee, powerful items, while distracting all the players, work in nicely with the game. And you can easily turn it off if you don't like it.
Through KO's or damage might not be so easily abused, but people find the craziest exploits just to win a game (and make it unfun for me, and I'm sure a lot of others, too).