There isn't a problem with Byleth at all. As far as FE characters go Byleth is one of the more unique characters and Three Houses is one of the most successful and popular FE games in the series.
There isn't even an issue with Fire Emblem getting an 8th rep. The issue is that people seem to have some "playable characters per sales" mindset, while ignoring countless other factors, such as legacy. FE maybe doesn't have the sales that other franchises have, but FE is a franchise that has existed ever since the NES era and has existed before many other franchises in Smash, and has consistently seen game releases since that time too.
When it comes to Smash content, people only seem to focus on playable characters and ignore literally every other gameplay element in Smash; there's just too much tunnel vision. yes, FE has a couple more playable characters than Zelda, but then Zelda has more content than FE in almost every other way. And no, just because some people don't care about nonplayabl content as much or at all doesn't mean there doesn't exist people that DO, not to mention that regardless of how people feel about it nonplayable content is still content that Sakurai and his team had to put alot of work and time into, work and time that could have gone into anything else but didn't.
honestly, on top of all this, it just seems silly how only FE seems to get this "overrepresentation" complaint. I mean, Animal Crossing is a much bigger deal nowadays compared to stuff like Star Fox and Kid Icarus, yet AC has less playable characters than both franchises. Where's the complaints of "over-representation" with SF and KI? Kid Icarus had some of it back during Smash 4 but I don't see anyone making said complaints now despite the fact that KI still has more playable characters compared to bigger franchises. Some people might be willing to bring up "legacy" for SF or KI but then why the hell wouldn't that count for FE for the reasons I brought up before?
There are issues and complaints that could be had with FE's representation in Smash:
-of the 8 characters, 3 characters from Awakening. I get Awakening was a huge deal for FE but sheesh, I think 2 was just fine.
-4 movesets that are pretty similar to eachother (Marth, Roy, Lucina, Chrom) Obviously these characters aren't completely 100% the same (not even Lucina) but are still similar enough to not really be exciting on the moveset front
-The weapons triangle doesn't exist outside of Byleth
-Still no villain or antagonist. Every other major Nintendo franchise has gotten this, why not FE? black Knight would be cool, or a certain character from Three Houses.
-One thing that really disappoints me is the fact that Fire Emblem 7 doesn't have a playable rep, you know, the first game to release outside Japan and introduce FE to almost every non-Japanese person.
So yeah, FE's representation has problems, but the fact that it has 8 character ain't one of them. Quite frankly if the above issues were addressed, I'd have absolutely no issues with FE having 8 characters.