Steve dd start out as just a skin.
But he also gained an identity in due time. It took longer than someone like Link, but he's not just a skin anymore. He's an outright character. It doesn't mean he can't have some neat skin options in the same way Pikmin & Olimar have Alph either, since the reason the skins work is "cause they play pretty much the same". Steve makes sense with having skins of others. But he's no less a full-out character, not just a skin. Both reasons work for either which way. I think he's better off with an Alex alt and his alts can reference other notable skins within Minecraft. Various enemies, etc, could give him a different shirt/pants design based upon those.
Yeah I think the best thing to do would be Steve and Alex half-and-half alts. (Steve being the main) with tuxedo Steve, dress Alex, and mob-designs on their clothes (and maybe pumpkins)...and
maybe a couple of spin-off only characters like Jesse and a Dungeons character (personally I just want Steve and Alex but I know it may happen; I’d also love Herobrine alts. but of course that very likely wouldn’t happen even if they wanted to due to weird, apparent legal stuff...).
Steve started as a standard skin but was soon turned into the main dude who is always pushed in marketing, merch (including plush toys and figures) and stuff and nowadays official pixel art etc. alongside Alex and the Creeper (even if, besides the Creeper, they’re sadly not in novels and maybe not the movie...). He was the main character in the 2011 Minecon trailer, made a couple of crossover appearances in at least two other indies (one that same year; Super Meat Boy, the other was Retro City Rampage, and Minecraft’s crossover appearances don’t stop there even if Steve was only playable in those first two), and of course he and Alex are the main characters in modern trailers and stuff like I said.
I think skins based on Mario and such would not be nice at all personally, unless it’s literally Steve and Alex with their clothes on instead of them being replaced. Though I don’t think they would actually do this tbh since it doesn’t really make sense to use skins of characters who aren’t from Minecraft when representing it in Smash. I mean, it’s fine if others would like it of course, but as someone who really likes and cares about Steve and Alex, personally please no.
Also, having more than just Alex as alts. could cause issues if they don’t make unique facial animations for them all (hopefully assuming they use the beautiful, expressive animation style in the Nether Update trailer, though personally I wouldn’t mind their original animations either; I just, y’know, think they’re cool and they make Steve and Alex feel even cooler...), though I guess this is fine for most of the original Minecraft human characters (might not work well with some Nintendo skins and other character skins).