I dislike grandfathering in principle, as I think every character needs to stand up against whatever else could be worked on in their stead, whether that be newcomers, other veterans, or whatever else. But I would never boil it down to something as simple as "irrelevant, therefore cut." Especially when it comes to cutting entire series.
One of the big issues with "Smash legacy" is that, most of the time, it's just a blanket argument against cuts broadly. It's little more than a general expression of the desire to maintain the iterative nature of Smash sequels as strongly as possible.
In any case, at its worst, I think it (1) closes minds to alternative options for the roster (which may have been overlooked, ill-timed, or simply not possible in the past); and (2) leads people to put too much or too little weight into certain characters' merits, whether that's creating a double-standard where characters not in Smash are treated like nobodies, or underestimating the importance of more recent additions because they haven't gained the arbitrary "Smash staple" status.