It's organized but it's very unintuitive, because most people don't categorize characters in that way. That's a very Sakurai/dev team way to organize things, because in the data it would make sense to have a standard order based on when a character was added.
But for most people, organization by series makes more sense. Characters are easier to find when next to related ones, and there are a lot of people out there who started later than 64 and would jump in at the point maybe three or four games' worth of fighters are all newcomers to them - making this classification pretty unhelpful.
The numbering system works for a game like this 1) with no gaps because all characters are present and 2) as a facet of the marketing because of how many characters there actually are - but when it comes to the CSS, I don't think it's the most effective way to organize the choices, even if it is organized.
I found it extremely easy to work with. Series never mattered compared to clones being by who they're from. Which was generally that way outside of Smash 4, which completely made no sense and was a pretty horrible CSS overall.
Melee and 4 were extremely inconsistent with no clear theme of where to go(this would've been fine if they found a way to have Link and Young Link next to each other with Samus where Ganondorf was, but he would still be next to Falcon). Of course, that also isn't much better due to how much space there was, and all the clones in a special corner. Overall, it was an awkward one. Brawl had an issue with going from left/right to a very sudden up/down system that did not work at all and was really confusing. 64 at least had Mario and the subseries next to each other. I don't need to explain 4 again(though they could've made it at least consistent by having Yoshi either after Mario or Luigi, or after Bowser Jr. Since he debuted before Mario, but his own franchise, he can go after either Mario Brother, and Bowser Jr. is the last of the Mario franchise too. Very easy fix). The clone Trio could easily have them next to the respective counterpart.
Though it's worth noting the normal Clone characters were always in a special spot(so this includes the Echoes, and the Model Swap Fighters from 64, Melee, and 4, respectively). Which only Ultimate managed to make it... make a bit more sense.
That said, being they aren't consistent anyway outside of barely twice(and these are not actually consistent anyway) with having Franchises next to each other(including spin-offs, respectively), the idea never actually worked that well. People recognize the character by being the character, and we already have more than enough websites that are available so it's really easy to figure out how your character is organized. This isn't an actual problem to fix. It was never unintuitive either, really. It really damn easy to find anyone since it required very little research and logic to understand what's going on. Only 4 was actually unintuitive due to no consistency. It requires only a tiny bit of work for anyone to know what's going on, and the actual never stemmed from the organization. The fact the roster is massive was always more confusing, and no amount of organization will ever fix that. Organized by series? It's still too big to feasibly be hyper easy to find who you want. You don't even know where to start. Ultimate was clearer in where you wanted to start by having at least a system. It also wasn't just marketing, it was much easier for them to organize in the first place because it also adhered to the website and how Echoes are classified specifically. It made things relatively easy. You won't get it any easier for the new design otherwise. Echoes will never made sense unless they're right next to the character, specifically on their right, where they're easy to stack.
Regardless, while I don't think the numbering scheme will stay due to lots of cuts, the system is very unlikely to change that much either. Especially since 4 most characters are still in "reveal order" too. The only one to really change at all is Zelda and Sheik at best, for more regular characters(with sometimes clone sets being in odd placements, except Echoes, who, as I noted before, are extremely specific to how they're done). It also doesn't help that characters move to massive different spots in other CSS designs outside of 64 and Ultimate, which are actually way more confusing too. It's relatively simple when the difference is a strict order that never changes or never actually changes in the first place.
No I actually think there's a lot of utility in being able to do that. Whether that be to organize fights with, say, only characters in certain tiers allowed, only characters from certain franchises/genres, only the original 12, only the starting roster (like re-hiding secret characters), only 80s characters, or whatever other arbitrary thing one can cook up (actually, typing this out, maybe they could even go a step further and let you easily save/load such rosters). Or, come on, just to simplify things in cases where large portions of the roster aren't going to be selected by anyone in your current play group for whatever reason, which happens a lot with such a huge roster nowadays. Or to toggle what can come up from selecting Random, although that could potentially be a separate feature.
In any case it's not really petty to want to hide a character, even if it is just that you don't particularly care for them and don't ever use them; it's just giving players more options to play the game how they want and turn things on or off, fundamentally no different than say toggling particular items on or off.
Again I don't expect it to happen at all; it would be a very niche thing to include. But it is a feature I would like.
Except a lot of these reasons are highly petty. Just disable it per a username instead. If they don't want to select certain characters, it won't let them use it. Problem solved. For instance, when they go over a specific spot, your icon will gray out to indicate it(but also it won't let you place it on the icon). These work way better.
The game will never realistically organize it into a small version because it isn't a small game. The whole point is that the CSS is now larger than it used to be. I could see special modes dedicated to it, like how Melee had those cool custom mode options, but that's quite different as well. It actually is organized and makes more sense. You can still set each particular roster per the mode in any order that works, though.
But yeah, hiding is it completely petty. These aren't mode changes. These are making them hidden for the sake of it. Custom modes are cool and a good way to work the custom roster idea in, while keeping it themed in a more unique manner that actually makes it work well within Smash's style. It's actually something that has been done before. Some modes hide specific Stages or Characters instead.
That said, I do hope we get a way to rearrange the roster, especially after how atrocious 4's design was. 64 and Ultimate's were the best ones currently, with Melee and Brawl being mid. 3DS looked even worse than Wii U's too. Having to use a menu to select more characters? Horrific.