I just want to say, you say you were going for the least impactful ones but cutting characters like Hero, Terry, and the Ice Climbers will definitely have an impact.
Well for one thing, this isn't a final draft or anything. I may change my mind. Also keep in mind that I'm not saying cutting these characters wouldn't be impactful, only that it would be less impactful compared to other characters. Of course, if I'm having trouble making a decision there will be some subjectivity involved.
My thinking may be a bit messy in places, but when I think impactful I'm thinking of both how well known a series is and how well known the playable character themselves is. Further, I feel we should consider whether a character was heavily requested or if they fill a "role" that other characters do not.
Terry and the Ice Climbers matter to us, but they're relatively unknown in the grand scheme of gaming and their absence will definitely impact less people.
Dragon Quest is definitely a tougher call to make because the series is so huge and beloved, but I basically chose to cut The Hero for the same reasons I cut Kazuya:
DQ and Tekken are both immensely popular series, but the characters representing them in Smash aren't quite as well known. Seemingly, these characters weren't that highly requested, and both Hero and Kazuya fill the role of characters from a legendary RPG and fighting game series (respectively) that was already filled by Cloud and Ryu.
At the end of the day though, again, if I'm having trouble making a decision, it'll come down to my personal preferences. My list was both what I wanted to see and what I could see happening.