What do you guys think of Rhythm Heaven and it's current status? Is the franchise in a healthy place? Why haven't we seen a game in a while?
Why do you think it was cut from Smash 4?
Healthy place? Well, objectively no since we're coming up on a decade of nothing, but the audience for it is as strong as ever. I constantly see Rhythm Heaven posts go viral on Twitter, Heaven Studio just came out a couple months back to make fan content all the easier to produce, the series continues to get shout-outs in WarioWare with a very explicit one as recently as Move It. I'm going to assume we haven't seen a game for a bit mainly because of higher priority demands. The team clearly wants to do more with the series, Tsunku has expressed interest in seeing it continued, but Warioware typically comes first and fulfills a similar niche. Why we got two Warioware games before a single Rhythm Heaven game on Switch I'm not 100% sure, but WW traditionally takes full advantage of a system's hardware quirks and the Switch has plenty to explore. They are cheap, fun showcases of a console's capabilities. Rhythm Heaven likely isn't attributed such a generalized role.
Tsunku's health complications may have tentatively put the series in a state of limbo as well, but perhaps even moreso is the lack of confidence in Megamix's marketing and release that likely led to its sales being less than spectacular. Apparently it barely scratched a million, which is not bad, but an eShop exclusive shadow-drop is not something typically reserved for a series Nintendo views as especially valuable. I think a new game could show up at any point since they are cheap to make and since I don't anticipate the game would see a very long rollout, but to the same token my expectations are tempered.
As others have said, assuming the character planned in Smash 4 was Chorus Kids, it was probably a number of complications from hardware limitations to difficult execution that did them in as a presumed low priority newcomer to begin with. Who knows how far they got into development, seemingly enough to have a Smash Run enemy, but introducing mechanics such as rhythmic inputs and one way or another building a trio character in a game already struggling to bring back its duo likely made them an easy sacrifice when down to the wire. We know Bowser Jr just barely held on, and he seems way less intensive or complex. And if I remember correctly, if the Koopalings didn't work out he'd have been a goner.
And while Rhythm Heaven was nowhere near a complete unknown, compared to many of the other characters added this game (Villager, Wii Fit, Little Mac, Duck Hunt...) its notoriety was more questionable. The inclusion of Shulk makes this reasoning more dubious, but many of Smash 4's additions catered to a wide audience and many already had wild gimmicks. Villager, Wii Fit and Duck Hunt already served as surprising, quirky non-fighters that you wouldn't expect and were more easily understood by an onlooker. Perhaps on top of its relative obscurity, Rhythm Heaven felt like it would be overdoing Smash 4's silly unexpected flair in comparison to more "cool" and traditional fighters. I have no basis for this, but it's something I could see being the case. Roster balance is important and Smash 4 was already very experimental as is. It was probably that first point that did the Chorus Kids in, but these elements are probably what made them lower priority in the first place.