It still surprises me how much people took Sakurai's comments on Rex to mean that Ultimate couldn't get a newer character. Sakurai was just referring to base game at that point because that's when that content for Spring Man and Rex were showing up on launch day. The DLC was already well under way by then, and they had just not chosen to prioritize an ARMS rep or a Xenoblade rep at that point in time. They could have very easily chosen either for Fighter's Pass Volume 1 just as Byleth did eventually end up #5 in the pass, but that just wasn't their focus.
I'll admit I was someone who didn't put much stock in the idea of an 8th Fire Emblem fighter just because I figured the backlash to Corrin and the pretty solid treatment the series seemed to get in base game Ultimate would lead to us not seeing any more Fire Emblem content. I entertained the possibility somewhat because it was suspicious that we weren't getting any Three Houses Spirits and Fire Emblem Heroes had been nothing but a huge success for Nintendo since Fates' release, but I figured Nintendo and Sakurai would be happy with the 7 and Chrom being added. In retrospect, Nintendo's continued investment in Fire Emblem should have been a bigger red flag to me. Fire Emblem Warriors and Heroes showed just how much Nintendo wanted to build up the brand and since Awakening the series has done very well despite its more inherently niche gameplay and sales pitch. It was one of the more legitimate Nintendo franchise success stories that had been 6 years in the making when Byleth was presumably chosen in 2018.
I think ARMS and XC2 just kind of got put in a situation where Nintendo was looking to watch and evaluate them as franchises. ARMS was a brand new IP when Sakurai developed Spring Man, and after ARMS sort of didn't go many places as a title beyond or really take off as a brand the same way Splatoon did (which it never was going to, but it didn't see any massive enduring success), I think there's a good chance Nintendo wanted to hold off on developing the brand further for the time being. XC2 is a little bit weirder, but I think it comes down to the fact Shulk was seemingly pretty lucky to get into Smash 4 based on Sakurai's own words, and Shulk could also advertise the Xenoblade brand by already being in the game.
Now we've seen what happened with ARMS as Nintendo clearly re-evaluated and decided to invest once again (which does seem rather contrary to how they've handled ARMS entirely over the past couple years post end of support), so we'll have to see what XC2's situation looks like. Shulk ironically does a damn fine job advertising when his critically acclaimed remake and Definitive Edition just released and Xenoblade is already in Smash. That doesn't exclude it from getting more content, but I can see a reality in which ARMS gets chosen for the upgrade and XC2 doesn't. At the same time, it would be odd given the general push for Xenoblade and continued success of the series to not see another expansion in Smash before all is said and done. Rex & Pyra/Mythra felt like a natural set of characters to come back to post Fighter's Pass 1, but I do wonder with how differently Xenoblade seems to have been handled already (XC2 songs and Spirits in base game and a Rex Mii Fighter as a FP1 Fighter Bonus still strikes me as a more definitive way to shut him down than most) if that'll be the case.