I guess in a way, Slime not having any limbs can be an issue. But even so, it can hold a dodgeball, so it's capable of holding items. It's probably Slime's movement that may be a challenge.
That is the funny thing. Since I've played Mario Sports Mix and have at least seen enough of the Dragon Quest Heroes games it actually would not be that hard. Yeah if I had not have played those games I would probably agree with everyone else that it is a stupid idea, but that is not the case. Here is what I know Slime can do, what I call the essential functions of Super Smash Bros.
Hold items? Check.
Throw items? Check.
Lift heavy items (crates, barrels, people)? Check [Rocket, from Rocket Slime, lifts heavy boulders and crates in that game.]
Hold onto ledges? Check.
Swing items? Check. [In Rocket Slime there is a Slime that can hold a sword.]
Attack enemies physically? Check.
The only thing he has never demonstrated is the ability to grab people. Even then with enough creativity that is not an issue. I have always thought that Slime could wrap around the enemy, and pressing A would have him constrict the opponent. From there he would do things like unraveling the character like a top, forming under them and lifting them atop his head to toss, stretching out and slingshotting them into the sky, and so on.
At the end of the day Slime is a lot more capable then he is credited. At the same time I think he could be an extraordinarily fun and unique character. It is a shame people cannot look at the material already out there and see that. That is what seperates him from Mr. Saturn and Goomba.