Actually, that REALLY does not seem so outlandish when I think about it...FOR THE LOVE OF CORN, IT'S PRACTICALLY A COMMON (and at this point in time, it's more or less, accepted) THEORY THAT SUPER SMASH BROS. IS ALL TAKING PLACE IN THE IMAGINATION OF A CHILD, AND THAT THE PLAYABLE CHARACTERS (and to a lesser extent, the Assist Trophies, Pokemon, and all other characters who show up in the series) ARE ALL JUST TOYS AS WELL!
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EDIT: BTW, do you all mean that the doll in the new game is called Nicky, or that the Savvy Stylist of this game is given a "default" name, and it's Nicky?
POST-EDIT: You know, with the way you described the doll, I could almost instantly picture the newest Style Savvy having an intro akin to Smash 64's intro.