In regards to the IndieGamerChick stuff, Sabi has confirmed that IGC said she's only heard Banjo-Kazooie; the person who told her this new info on Discord was from IGC's team, though...but it could be misinfo. Sabi also trusted Xenother, yes, but wasn't sure about what they were saying, just she knew they were being honest with what they heard.
You made good points there, well done.
In Japan its definitely more popular to point where it doesn't feel like an indie game anymore. The popularity is mainly due to the amount freedom the fans have when comes to fan made material. Still the amount of popularity is strong enough to get Reimu considered for smash, no matter how big the western fan base is. Hopefully ZUN will allow it since an official game is on the way to the switch. No doubt the front runner for bullet hell rep is Touhou.
One thing i forgot to mention is that since Touhou already has official fighting games with Reimu and Marisa being playable in all 6. So Reimu already has quite of few options available for Sakurai to use for movesets and mechanically be more unique than Steve. Not sure what Steve can bring into smash that would be unique mechanically and as a character. I mean hell, Marisa is popular enough that she could be in smash instead of Reimu, 99% likely it will be Reimu though.
Agreed. From the recent shareholder Q&A, Nintendo wants to prioritize appealing to as diverse of a demographic as possible. And what you say is true - while Touhou is niche compared to Minecraft, Reimu's inclusion would definitely be turning a lot of heads that Steve wouldn't even be able to touch. And considering the current demographic shift with the Switch, I'm quite confident that we're getting an otaku-appealing rep, whether it be Reimu, Saber, Miku or Katalina. I'm personally hoping for Reimu.
I'm sure a character from Touhou could be unique based on what I've seen, but Steve could be unique by using blocks or any of the unique items from Minecraft; there's lot's of things he could do. Not that it matters, because they're completely unrelated to each other.
And I'm certain he would turn a lot of heads as well, due to how many people like the game and possibly haven't bought Smash (though I'm sure there's some overlap with Smash as well, which is already apparent with some wanting Steve on twitter among other places such as this site, but I guess that's for everything).
Plus, Steve wouldn't be competing with Reimu or any other indie character, as Minecraft isn't an indie anymore, anyway (plus, as I said, they're unrelated). Even if it was, there's a possibility Sakurai doesn't care about representing indies with a single character, as he'd consider the character and their game alone instead of looking for someone to fill some made-up "indie" quota, as I'm sure he doesn't look for characters to fill some quota for a specific genre, either. He likely goes for who he thinks would be good characters among other reasons, but we have no way of knowing if he chooses anyone based on representing something other than the character's game itself (the only exception I recall is Pac-Man, who still mostly takes from his own arcade games and is the most-iconic character from Namco at least among their arcade).
Of course, Nintendo has influence over who is chosen this time around (at least, it seems, more than they have had before, if at all), but I'm sure some of this stuff would apply to them as well. If we're basing who's likely on who Nintendo may want to attract, Minecraft certainly has one of the largest crowds available (though I believe Banjo-Kazooie may get in instead, which would make me happy as well, as they may be chosen as a fan-pick or to appeal to some of the older crowd or Microsoft fans who likely found their game through gamepass, and what they've been getting recently seems to show Microsoft has plans for them, since their games are even being put on those demo-things in stores).