In any case, in the anime (which the Pokemon in Smash are oft based on) preevolutions are frequently depicted as being faster than their evolved counterparts, and in the Pichu short before the 2nd(?) movie Pichu was shown using a much more powerful thunder attack than Pikachu but hurting himself in the process. Going by that logic it'd be perfectly logical and borderline canon for him to be faster and stronger. Oh look, I actually ended up talking about canon after all. Totally unintended but I guess it works.
That singular occurrence in which a singular Pichu used a powerful move in the anime probably carries less canon weight than the games, in my opinion, but hear me out, that's a small gripe and I'd rather discuss this part:
Pichu would be unique in that he'd be a glass canon as well as a high risk high reward character with the self damaging mechanic crippling some of his better moves. The premise would (in my vision) be that his all purpose moves that his meta game in Melee was built around would remain safe to use and some of his self damaging moves would be buffed to high hell. For example, maybe his f-smash would be easily his best kill move but it also damages him a hefty %; the player would have the choice to stick with combos and edge guarding/hogging or to speed up the process for a price. Damaging moves could also help in combos or such rather than just being pure power moves creating diversity.
Now you're bringing up some stuff that I can get behind a little more enthusiastically. I like that you want to keep his Melee self intact, but add the risk/reward as an additional layer of gameplay; I could legitimately see that as an incentive to use my best moves, but not spam them because they are the one and only best option (coincidentally the problem a lot of people have with certain P:M character designs). A few things I'd like to discuss on fine tuning his potential design are:
-Pichu needs power moves that can connect, not necessarily just more powerful moves. I think I've mentioned that the base knockback value of Fsmash is akin to Marth's tipper Fsmash (it might even be slightly higher). You could add something like a little more knockback growth, but it still requires negligence on your opponent's part to actually get that hit. Some moves should be powered up (off the top of my head: thunder, dair, skull bash, pummel) but buffing everything excessively will lead to an unhealthy polarization of the character. Then again, you seem to tone it down a bit by stating that not all self-damaging moves have to be KO moves, and I really like that idea. See my suggestion for powering up pummel: using a precious grab to deal a lot of damage at the cost of more self-damage. Same story for combo starters/extenders.
-Quick Attack Cancel is one of the biggest problems here. Agility moves slower than QA (not sure about invincibility data in comparison), so it will be less effective for on-stage cancelling and lower Pichu's overall speed in comparison to Pikachu. Answering by physics buffs or an Agility speed increas might be acceptable, but something that should be approached with caution because it will change the feel of the character. If agility still hurts Pichu as well, that's just a slap in the face. Whether Pichu can Agility Cancel or not (possibly for a nostalgic moveset or uniqueness) he has to have some sort of answer to QAC.
So yeah, he could be really cool. If nothing else Pikachu is an interesting character and a clone of him means a different twist on a unique moveset.
I've always liked having clones because they add some of the most fun matchups to the game. In competitive Melee, is there really a more iconic matchup than Fox vs. Falco? I find clone matches to be extremely enjoyable, moreso than dittos, because there are few easily exploitable strengths that my opponent can't use as well, but I have enough differences to hinge a strategy off of. They also add an interesting dynamic when played by other characters, since there is just enough matchup unfamiliarity to force a flexible playstyle on your opponent's part, but not so much that they won't know how to fight. I certainly wouldn't begrudge Pichu for being what you described here.
Unrelated:
pretty badass, I thought for a taunt you could have him pull a thorn.
Nice. Two more: he takes the fencing stance right before he does the jump attack in the video and the eyepiece on his mask glows. If he doesn't otherwise have the series of swipes he uses when shooting lightning, that can also be one. Or they could make it a taunt even if it's included, saves animation time.