I'm really hoping that Min Min's inclusion in Smash gives ARMS the boost in popularity it needs to become a more prominent series for Nintendo. The potential is definitely there if they ever decide to make a sequel.
I agree, but speaking as someone who hasn't played ARMS but has heard what people have said about it, I think it might need some more gameplay features or style to make it really soar. I love Splatoon and Splatoon as a series exploded due to its' wealth of engaging gameplay mechanics and modes, and the raw style it oozed. By comparison, ARMS just looks a little bit more bare bones imo. I've heard the battles can drag on and aren't always super fun and engaging to do again and again (But that does come down to personal opinion). I also saw a lot of people mention that we barely get to learn about the actual ARMS fighters, with the grand prix barely acting as a story mode. I think those two things alone would make a potential ARMS 2 something that might really appeal to me: something to spice up gameplay, and proper story modes for each character complete with cutscenes, explaining who they are, they're stake in winning the ARMS league, if they're good or bad, who their enemies are, a proper end sequence where we see what happens when the characters beat the champion and where they end up, etc., with cutscenes between characters and maybe even voice acting if the devs were so inclined. If those things happened, I may very well be all in on ARMS. The only other big thing I want to mention is the grind of unlocking all the arms from other characters for everyone. You can only do that in one mode, and you can get useless duplicates? Hard pass. In ARMS 2 I hope they make unlocking ARMS more like Smash Ultimate character unlocks where there's multiple ways to do it, you'll be getting other ARMS somewhat quickly, and no dupes for the characters.
Honestly, I'd probably have to play ARMS to tell you what I might want to add to gameplay, although I was watching some ARMS gameplay the other day when I considered that, as a 3D fighter, ARMS probably would lend itself well to the arena switching mechanic some 3D fighter utilize. Having stages where a strong attack towards the right wall could launch your opponent into a totally different place for additional damage, and then having your character join them to fight in new side areas of some stages would be a cool way to add some style, stakes, and sass to the game if the alternate arenas were cool. They'd be stinging to be hit into, but so satisfying to personally pull off. Like, Imagine in Ramen Bowl if a heavy ARM hit or a rush attack could launch the opponent
into the noodle restaurant, where the combatants just keep fighting inside the restaurant in a new arena layout.