I like it for Ultimate, even for use beyond casual/side tournaments. Make it standard/default with a good handicap system, kind of like CVS2. If you use more than 1 character, then you have to accept handicaps, though you can choose your weaker and weakest stocks.
For example. If 3-Stock Match is the standard, you can pick up to 3 characters. You can apply handicap A, B, or C to whichever character you want.
Player 1
1-Mario -> C
2-Luigi -> A
vs
Player 2
1-Bowser -> No Handicap
or
Player 1
1-Mario -> A
2-Luigi -> C
3-Peach -> B
vs
Player 2
1-Bowser -> No Handicap
Examples of handicaps.
A = 85% Damage Output
B = 80% Damage Output, 10% More Damage Taken, 1.3x Shield Deterioration Rate
C = 75% Damage Output, 15% More Damage Taken, 1.8x Shield Deterioration Rate
Whatever the handicap options, players who want to bank on the "matchup mixup" option of using multiple characters has to feel the handicaps, while risky, is a fair trade. But at the same time, someone who wouldn't mind going with multiple characters should feel like the "no handicap" route for that single character they believe in, regardless of what match ups lie ahead, is compelling too.
Also, you can hide the order of your stocks during character select by pressing a D-direction at the same time of choosing a character.
D-Left = #1, D-Up = #2, D-Right = #3, and D-Down = #4. So while Peach may be the first character you select, your opponent doesn't know that you pressed D-Right to set her to 3rd Stock.