Mario: I have cut Daisy because she can be a skin of Peach. Same for Dr Mario. I have added Toad because I think he is an important character, he starred in a game (Cpt. Toad) and there are still some gameplay mechanics from Mario that can be represented by him; additionally, Toadette would be a skin.
I added E. Gadd because a new Luigi's Mansion game is coming, and I think the old guy has some potential if his moveset is made of gimmicks built by himself.
On a side note, Toad is just Toad, but Captain references are in his moveset as well, and the captain costume may be a skin for both Toad and Toadette.
Also, Luigi and E. Gadd may be separated into their own franchise.
Donkey Kong: Dixie is a natural addition. I also added Pauline since recently, thanks to Mario Odyssey, she has got quite some spotlight. Pauline is hard to think a moveset for, but I think she can include some mechanics from the Mario vs DK games, with the Mini toys being part of the moveset.
Zelda: I've cut Sheik, but not really. Sheik's moveset is Impa. I think it makes more sense to have Impa instead of Sheik to represent the Sheikah... but Sheik can be a skin if people don't want her to be cut completely. I assume that Young Link and Toon Link get decloned with moves inspired by their origin games (Ocarina and masks for Young Link, for example). Ganon is a completely different character than Ganondorf, and I also added Tetra as a Toon counterpart for Zelda (though her gameplay would be completely different). Tingle and Midna/Wolf Link are full newcomers as well, I think they are important enough to the franchise to deserve a spot, and they can have original gameplay too.
(I included him regardless, but...) Toon Link can be cut, since Nintendo seem to have abandoned the "toon" art style recently, in favor of new experimental art styles (Link's Awakening remake) or the classic style from the old games (A Link Between Worlds); also Tetra can represent the Toon games well without being a clone.
Metroid: I added Sylux, but this assuming that he will have an important role in Metroid Prime 4. If not, then he can be cut.
Obviously, Dark Samus can stay but it needs to be decloned. Phazon can be a character gimmick and maybe it can use the same physics as the Inkling's ink.
Yoshi: I added the Baby Bros. under the Yoshi franchise, but they are there more to represent the Mario RPG series, by referencing Partners in Time. They have moves based on hammers and jumping on enemies, team moves from the Mario&Luigi series and usage of consumable items. Some moves can be inspired by Yoshi's Island (such as the "Super" power-up in the game). If punching babies in the face is a problem, then they can be replaced by Paper Mario, with a similar gameplay (minus team moves maybe).
Kirby: I think this series can have at least 5 characters, right? I selected Adeleine & Ribbon (the roster maker didn't have an icon for the duo), and Magolor.
Adeleine was an important character in the Dark Matter trilogy, and her return in Star Allies made a big noise in the fanbase, while Magolor is the most important character of the modern series. Both have potential for a creative moveset full of Kirby references.
I've considered Waddle Dee too, but I don't like the idea of "Bandana" Waddle Dee, if they are going to be added to the roster, I think they should be as a species in general. Though, I think Waddle Dees don't fit well in a fighting game, they're usually paceful and passive, I think it would be out of character for a Waddle Dee to be promoted as a strong individual warrior ("Bandana" is really the only exception and not that relevant to the franchise as most fans make you think, the paceful and generic Waddle Dees are still the main image of Waddle Dee that HAL is promoting). Maybe a gimmick character that's a group of Waddle Dees fighting together in a clumsy way (also referencing the helpers system), that may work, but for now I just excluded them becaue I'm not sure what to do with them.
Star Fox: I've cut Falco, and I'm not particularly happy for that. But really, it's unfair to have Falco and not Peppy and Slippy. On the other hand, having the full Star Fox squad and every member plays similar, would be quite redundant. So I prefered to just cut him.
I added Krystal as I think she has way more gameplay potential than Falco and co.
Pokèmon: I have cut Jigglypuff, Greninja and Incineroar. I know that this will make fans angry, but let's face it, there are countless new pokèmon each generation, and some older ones become less relevant with the time. I think it's fair to cut some of the older ones in favor of new ones, and I honestly think that Greninja and Incineroar aren't important enough to deserve to stay, such as Pikachu or Mewtwo. Jigglypuff... he's gen 1, we already have Pikachu and Mewtwo... I know that Jiggly is iconic among fans, but it's not that important to the franchise, aside of the first season of the anime.
I left a question mark for new pokèmon to be added... if needed, even more than just one. Also, the starters of the Pokèmon Trainer should be replaced with the current gen ones.
Mother: I removed Lucas since he plays similar to Ness. I know... but I think the Mother series is not that important to deserve so many character, it's kinda like F-Zero, even more obscure probably. I added Porky in place of Lucas though, as I think he can be a cool villain in Smash.
Fire Emblem: I'm not an expert of Fire Emblem, so maybe I have cut the wrong characters... though I have cut every character that plays similar to another, and only kept the unique ones. Also, I have left a question mark for possible new characters from new games.
Kid Icarus: I have cut Dark Pit. He's a skin of Pit if you want, or just cut if you think his final smash doesn't match the character. I don't think he's necessary in the roster at all.
Animal Crossing: Added Tom Nook since he's the most important character after Villager himself. Not sure about the gameplay though, probably another Villager semiclone with moves that fit his personality better.
-Others-
Karate Joe: Rhythm Heaven rep. I think RH deserves a rep, and IMO Karate Joe is the best one. Chorus Kids may appear in his moveset anyway.
Mii: I have cut the Mii fighters in favor of a more standard Mii character, that has a moveset based on the Mii games. It can be considered in the same "group" as Wii Fit Trainer if you want, because the franchises kinda overlap.
Nintendo cuts: I've cut Little Mac since I think his moveset is a bit too basic and I don't like his gauge based KO move. I've cut Shulk because, you can disagree on this, but I think he's not really an iconic Nintendo character... also, since the new Xenoblade games have different characters, it's a situation where the character himself becomes less and less relevant as new games come out. A Cloud-wannabe, what's the point of having it when you have the original in the same roster? (sorry fans).
Third Parties: I've cut Snake, Ken, Bayonetta, the Belmonts and Joker.
All of them excluding Ken, I think they don't fit Smash thematically/stilistically, at all. Also, they aren't even that big as gaming icons (aside of maybe the Belmonts), they're from popular games but not iconic like Sonic or Pacman. Ken is an echo, I think the third party franchises shoud have only one character each, and especially not clones/semiclones.
I added Bub & Bob, Steve and Master Chief. Bub & Bob are from a classic and very popular series of videogames; Steve and Master Chief are from Microsoft... I know, there may be copyright issues, though they are pretty iconic, and Master Chief is the only realistic FPS rep that uses an art-style that fits Smash, IMO (the design of the weapons, armors and vehicles, the colors, etc).
Excluded ideas: Aside of the Star Fox crew and Waddle Dee/s, I also excluded a new Wario rep, because of the Land/Ware confusion and the fact that in order to represent the franchises well, I should have added at least 2 characters (Syrup and Ashley/Mona/?). I don't think the Wario franchise should get 3 or more characters alone, so I just dropped the idea, mostly because I tried to not add too many characters and to keep the total number of characters in a range where it's credible.
I also excluded Dark Souls, sadly... I admit it was mostly due to the layout of the character screen, but also because I already selected Master Chief as the "serious looking" character, and Dark Souls not having a main "mascotte" didn't help.
There may be more third parties that I excluded, some because I'm not familiar with the franchises, others simply because I prefer for Smash to stay as Nintendo-centric as possible.