Okay, personally, I imagine the whole problem with the Sonic franchise's representation in Smash Bros. could be simply fixed with a simple idea; just use other characters over the actual player of 'Sonic', somewhat similarly to the way this was achieved with Bowser Jr. and the Koopalings. This would mean the moveset is fundamentally identical, but the effects are altered. Remember, the reason that almost all of Sonic's alts are blue is due literally to the fact that his spin dash effects are blue.
With the simple alteration of the individual effects, here's my idea for feasible alts.
1. Sonic.
2. Tails.
3. Knuckles.
4. Amy.
5. Cream.
6. Metal Sonic.
7. Shadow.
8. Silver.
The case for any of these characters to be in Smash could potentally arise. I would suggest that this improved Sonic, as well as Dr. Eggman, would be perfect. However, if one of the 'alt' characters were to arise, I have a few other suggestions for alts as well as these.
9. Rouge.
10. Blaze.
11. Jet.
12. Charmy.
13. Espio.
14. Emerl.
15. Ray.
16. Mighty.
Now I'm aware that, canonically, this may not make perfect sense, but hear me out. One thing that may have been noticed is that all of the characters present do literally have the same abilities as Sonic himself, and this has been seen in many games. Now, I'm aware that some games are not so; Sonic Heroes being an excellent example. However, seems as many of them have demonstrated similar, if not identical, abilities during their existence as Sonic, it makes sense.
Now, I'm aware of a few other things, but these would need only be small touches that would essentially make Sonic as a Smash character a love letter to the fans of the franchise itself. A few such additions are listed below.
1. Different dashing/running animations. These include Shadow's skating motion, and Tails being able to fly.
2. Cheese (Cream's Chao.) It's a small addition that would do literally nothing, but would be such a love letter if it were to be added!
3. Different sound effects/voice acting/dialogue. After all, Amy wouldn't be all like 'Come on, step it up.' Put in the right stuff!
4. Different taunts. Although I get that it's really unlikely, having taunts that are based on each individual character would be incredible.
Of course, these are only the 'realistic' ideas. Say what you will/