Correlation =/= causation. The aim should be for both rather than one or the other. For examples that are canon and have a fun gameplay loop: meta knight, snake, pit, villager, wii gif trainer, Rosalina, greninja, pac man, robin -‘s pretty much everyone who came after that, the examples of canon movers turning out good are much more numerous than the opposite.
And that led to Meta Knight being severely overpowered, not "balanced properly". Snake wasn't much better, being rather OP(though he still had to have a fair amount of moves made up as is, and a lot of stuff wasn't allowed. He couldn't have regular guns nor his knife, changing his options quite a bit).
Robin suffers a lot from the gimmick, being even worse than MegaMan. Wii Fit Trainer is an awful character balance-wise and is near bottom tier. Pit, again, is Pre-4, so that doesn't mean anything when you're talking about applying Smash 4 standards. He's also mid tier in Brawl, with the Gliding already being pretty broken as a concept(which is why it's gone in 4). Speaking of, in 4, Pit took a nosedive when they changed his moveset up quite a bit, including gliding being gone as part of what affects him.
Most of the time, the thing that actually makes these characters balanced has nothing to do with canon. It's actual proper work on the functionality and tweaks to make sure they aren't overpowered or underpowered. So... no, canon has nothing to do with making them flow well. They only flow well because of the work done. Canon doesn't have any inherent relevance to good gameplay flow in any way. It works sometimes, it doesn't otherwise. What still matters always is proper gameplay balance first. If and only if a canon move works should it be used. Which is actually why so many characters are terribly balanced, because they tried harder to be canon and less so to be functionally reasonable. Meta Knight is the only one who focused on canon and was nerfed properly in the next game(which is one of the very few times this worked out decently. He still dropped from his own tier to a few tiers below, but is above average). If we want to go further, Pac-Man isn't about canon either? So I'm not sure why you're bringing him up. He represents the Arcade games, not simply his own(with a pretty small amount of moves directly based upon what he can do). He coincidentally is also low tier.
Even funnier is Villager still can't break mid tier despite being canon. On the other hand, Mewtwo in 4 is high tier despite barely being about his canon abilities. Basically? Canon isn't taken into account with good moveset functionality and balance. It needs to take a backseat because it can create vastly overpowered characters like Meta Knight and pre-Ultimate Bayonetta. It doesn't work out as a good idea. If you can't make the gameplay balance work well, then the character isn't well-made overall. Adhering to canon almost always causes more issues as almost all of them have balance problems in some way. Greninja isn't adhering well to canon either, for the record.
So... no, canon moves aren't actually important to a properly functioning character. They're a visual bonus in the long run. That doesn't mean they don't look neat, but if they cannot flow, then they're not actual good moves for a character. How a character functions is most important, as every character is put into a competitive situation. Despite Ganondorf never being outright good, his issues never were with being non-canon. It's because they massively reduced his speed, making him unable to keep up with most characters, making him a major punching bag. Smash 4 barely remedied this with some super armor, which let him be slightly better in comparison to his placement in Brawl. As Ultimate has no clear tier list, it's impossible to say how well he does there. He was obviously buffed, but that doesn't mean anything without better data.
You can easily make a character look properly like themselves and feel right without worrying about canon moves in themselves. Ganondorf is still the epitome of power and terror. He still flows like a being with immense strength can be, while using magical power behind his attacks is his thing. He, again, doesn't suffer from lack of canon moves. He suffers from no way to deal with projectiles and fast characters whatsoever, which is what keeps him bad. the former is easy with a reflect ability. The latter is pretty much not something you can easily do without making him play entirely differently(and at that point, just make a new character if you want a new playstyle).
