Unfortunately after much debate with players, other TOs, and seeing debate from the community at large. I have decided to BAN Diddy Kong from GU events until he is fixed by Nintendo. The glitch is simply too easy to engage, and affects a match too heavily to be allowed to be played. Regardless of how "effective" it is as a technique for Diddy, it is clearly an unintentional glitch that affects a core element of the game (grabs are obviously more important for some characters than others, but we can't exactly ban Diddy in only certain matchups).
I am confidant that Nintendo will push forward a patch to fix the glitch quickly (it took them about a week to fix a similar glitch that occurred when Mewtwo was released) and as soon as version 1.1.2 is made public it will be required for all GU events and Diddy will be made legal again.
In hindsight we could have done what Big House did and not used the patch for GUMS3, but when we decided to use the patch this glitch had not yet been discovered. This is my fault and I take full responsibility. I apologize to all of the Diddy mains who are now stuck out in the cold and waiting on Nintendo.
This decision is final, unfortunately there is no solution that is both easy to implement and fair to all players. I apologize again for this situation, and sincerely hope it is resolved soon.