I really shouldn't have neglected a thread like this just because the thread title was misspelled (sorry, but I really did).
Custom moves probably improve the balance of the game even if they're slightly less balanced as individual moves on average. That might not make a lot of sense, but it's a statistical argument. When you allow custom moves, you're basically allowing every special move to be a "best of three" situation instead of a "just this one" situation. Without going through the math, doing this introduces an upward effect on the mean value of moves but actually a downward effect on the variance so long as we presume that introducing new moves retains the same bounding (that is, no moves more worthless than Sing or more overpowered than Mach Tornado, probably mostly accurate). In other words, a typical character will have more powerful special moves than it would have without them legal, but a typical character will get more similar overall value from its special moves to other characters than would occur with custom moves banned. @
Thinkaman
has actually developed the math here a bit and would explain a lot better than I am going to be able to do, but I do know enough about statistics to tell you that the theory is sound even if somewhat counter-intuitive.
That's why it's very important to very seriously give custom moves a fair shake; they are an incredibly promising system both in terms of gameplay depth and in terms of the fundamental effect that kind of system is expected to have on balance. The counter-intuitiveness of how the statistics work here is also important to keep in mind as a reason to be very lead-footed on bans; it's very likely that it will feel like banning custom moves or perhaps a few of the strongest variations will improve balance, but in the long run, going into that process has an expected outcome of making the game less balanced. 3DS just makes it easier since there are a variety of procedural hypotheticals that get brought up for Wii U that simply don't apply to 3DS; there's just no good reason to do anything but allow custom moves for 3DS based on our current knowledge.
Smogon is not exactly my favorite community in the world, but their runaway banning culture definitely has serious roots in the fact that they insist on trying to play 6v6 singles when modern Pokemon games are just not built well for that format which leads to the players trying to play them in that format ending up doing work that's more similar to game design than rule making for an already extant competitive game. That's not really analogous to smash so delving into the analogy further is really not very productive.
"For Glory" is not really designed to be a competitive format; it's more of a quickmatch feature for people who don't find the type of play in "For Fun" actually fun. It should not be considered or consulted when we make tournament rules.