This is an old one and obviously not all that true due to the inclusion of The Ice Climbers.
Sakurai said the following in an interview during the radio transmission of Tokyo's “The Gaming Show”.
He confirmed that the following characters will appear in the new Smash Bros.
Bowser Jr.
Ridley, the famous enemy of Samus.
Wind Waker Link.
And certain characters will disappear:
Ice Climbers
Mr. Game & Watch
Young Link.
Young Link will not really disappear since he will simply be replaced by the Cell-shaded version and his name will be always the same one.
The fans of Falco will be with the angels, since [Sakurai] has confirmed that the characters who weren't formerly “clones” will remain but will be worked over again to offer a true panel of blows to them.
In his opinion, the lack of interest for Mr. Game & Watch and Ice Climbers was obvious and he has to decide to replace them by Pit of Kid Icarus.
Pit should be the only one representing the “old school” and traditional ones.
Sakurai finally affirmed that the total number of characters should approach forty, leaving place for about fifteen new ones and one or two 3rd party characters.
also, i remember reading somewhere on this forum a while back that Charles Martinet (the voice of mario, luigi, etc.) stated that he did the voice for luigi in brawl.
then there's this
FAMITSU: Have you been approached to contribute Animal Forest elements for the new Smash Bros. game?
KATSUYA EGUCHI: Yes, and there is quite a funny story to it. A few months after E3 2006, (Masahiro Sakurai) contacted me and asked if I’d like to develop possible Animal Forest ideas for Smash Bros. Originally, we settled on just a quick, simple Animal Forest item, but with the success of Wild World and the Animal Forest film, he asked if I’d be up for designing additional elements. [Laughs] Fast forward a few months and I had stage and character concepts created. Sakurai chose his favorite of the stage concepts, slightly tweaked it to his liking, and we together decided on the final Animal Forest character, which is a very fun character to play. With both the stage and character I utilized ideas from the games. For example, if you play the stage at night, the sky will be dark. If you play in the winter, expect to see snow, and leaves in the autumn time. And yes, trees will be decorated on Christmas! It’s really something else. I worked very hard on this one little stage! [Laughs] The Animal Crossing character is very much like the one in the games. You know, he will use his axe, fishing rod, bug catching net, and everything else from the games.
last but not least
It’s been reported that Eija Aonuma, Director of The Legend of Zelda: Twilight Princess, stated that his designers had worked on the designs for Link, Sheik, and Ganondorf, as entries for Brawl.
I don't believe most of this because a lot of it lacks any real source.
But you asked for rumors and by golly I gave 'em to ya.