I largely missed the first vs third party discussion, but I figured I'd throw my thoughts in as one of the most vocal first-party advocates in this thread.
First, I think this entire debate is built on a misunderstanding that causes a lot of tension in this discussion. Namely, both sides assume the other is adopting the most radical position possible. Those advocating for first parties often see third-party supporters as exclusively wanting their desired characters from across gaming's landscape to build Smash into their own official M.U.G.E.N, trampling any potentially unique or fun characters that don't fit this idea of what Smash ought to be in the process. Similarly, third-party supporters often see first-party supporters as gatekeepers trying to keep fun and unique characters out of Smash to maintain some sense of brand purity. However, it's rare to find someone who wants exclusively first or third parties. While people's exact preferences may lean one way or another, most people want some combination between Nintendo's lads and cool characters from across other great games.
That being said, I think the argument that Sakurai ought to focus primarily on third parties because casting the widest net possible requires leaning heavily on third parties' characters is pretty flawed.
Yes, Dixie Kong, Bandana Waddle Dee, Rex, and Impa are not the characters that are going to have Joe Schmo jumping out of his seat. However, it is unlikely Dante, 2B, Lloyd, or Sol Badguy will do this either. The very general public is interested in a specific set of characters that have essentially transcended the medium and become modern pop culture icons, characters like Crash Bandicoot, Master Chief, and Ezio. Yes, this set of "pop culture icons" people desire in Smash does consist mostly of third parties, but that has to do with the fact that most of Nintendo's pop culture icons like Mario, Donkey Kong, Pikachu, and Link have been in Smash for a long time. In fact, that's why I think it's so weird that people are using Waluigi of all characters as their example of a first-party that wouldn't catch much attention. Most people who have played a video game in the last 20 years know who the character is because nearly everyone has played Mario Kart and his exclusion from Smash was such a meme that it was picked up by mainstream news outlets like Washington Post. As such, I think people are indulging a little too much in wishful thinking when they believe that their characters who are, in the grand scheme of things, relatively obscure in the overall pop culture pantheon would receive Steve levels of attention just because they aren't a Nintendo character.
I honestly think the best demonstration of this is something Smashtuber Little Z said upon Steve's reveal (WARNING: SWEAR WORDS):
Little Z: "I always want Avatar Aang, Waluigi, Crash, or... anyone I ****ing recognize."
Bigwinbeer: "Yeah, recently I don't know any of the characters."
Little Z: "I didn't know anyone in the last Fighter's Pass or Min Min."
Even with 4/5 characters in the first Fighter's Pass being third parties, the "big net" a lot of people have been discussing in this thread has not been cast. My friends are relatively knowledgable on what's going on in the gaming world, but they thought Joker was from JoJo's Bizarre Adventure, questioned why Banjo and Kazooie were added when Duck Hunt was already there, and claimed Terry looked like the fusion of a trucker and a member of 90's boy band. They didn't know who any of those characters were, so they definitely weren't excited over their possible inclusion. The only exception to this in the first Fighter's Pass was Hero, but even he has only transcended into a mainstream icon in certain countries. Third parties aren't guaranteed to catch the attention of the entire public.
However, is this a bad thing? Of course not. In spite of lacking an all-star lineup of mainstream icons, the first Fighter's Pass was awesome. It included a ton of enjoyable characters with awesome new playstyles. Ever since Melee, where Sakurai realized he had enough of his bases covered to begin experimenting with weird ideas in the roster, Smash has been an expert at giving us things we never knew we wanted. Few went to bat for the Ice Climbers, a Game and Watch character, R.O.B, the trainer from Wii Fit, or the dog from Duck Hunt with a duck on his back, but even fewer argue against their inclusion now. While none of the characters discussed, be it first or third-party, really reach this range of obscurity, but the general principle remains the same. Dante's inclusion would be a lot of fun, so who cares if some people are unfamiliar with the character? Same thing with Bandana Waddle Dee, Dixie Kong, Lloyd, Geno, 2B, or anyone else who isn't a massive star. There are 20 million people who own a copy of Smash Ultimate, some people are not going to know who certain characters are, and that's okay. Arguing that the Smash roster ought to primarily be decided by who will get the biggest initial reaction amongst the greatest number of people seems to be a short road to throwing out lots of would-be cool ideas and gutting a lot of the flavour that's made Smash's rosters so great in the past.