Brawl does that (make characters seem boring) to everybody. Still, I fear another broken/underpowered Kirby's Dreamland franchise representatives.
Separating Sheik and Zelda I think sounds like a bad idea. I think what should be done is make the transformation a taunt (Give us four taunts for each character!). That way, EVERYONE WINS! Also, do the same thing with the Pokémon Trainer and Samus/Zamus Sakurai!
The down B for Zelda should be some sort of new magic attack, possibly some explosion right in front of her covering about 15 feet (Nu-23 in Blaz Blue has a similar attack).
Sheik should definitely have that Deku Nut attack. I don't get why some of you people are saying otherwise... unless you made up some magic attack for her...
Also berserker, congratulations on your 5,000th post... and double post!
Edit: I'm only 339 posts behind you bro!