But why can't he just have hard hitting moves with swords? I understand your point about magic, although I think magic can be done in a way that feels powerful, but just because he uses technique doesn't mean he can't have hard hitting moves like Ike. Ike didn't feel hard hitting at all in PoR but it worked in smash.
The Sword of Sages is designed more for stabbing and technique. It's not a broadsword. It's a longsword. It's thin too. This isn't the kind of sword that can be swung like a club and make sense. Look at Nightmare from Soul Calibur if you want that kind of moveset. The sword itself is very important here too. He needs a new one first, one that is workable with the ideal type of moveset. Some moves can be replaced, of course. Up Air is not a super strong attack, just having reasonable knockback. Even the Sword of Sages works fine for that. Ganondorf(WW) has two swords and fight super differently, to the point that those swords are not feasible as an option.
Not to mention Ganondorfs were already some of the hardest hitting attacks in zelda. And there's absolutely no reason to think his moves wouldn't flow if he used a sword. Most characters are based off animations from their games and they flow fine.
Actually, that was more Ganon(who always sent you flying with his dual swords). Ganondorf's attacks were enhanced by the Triforce of Power, not so much the sword being used. Doesn't mean a long thing blade would make sense to be sending characters flying far super easily. It's not even possible for it to remotely replace some attacks, like his Forward Tilt, which works best as a kick type.
Maybe he throws a punch here and there, but his primary weapon is usually a sword. And they could just swap what his sword looks like just like the rest of his design. Use the oot sword in melee, and the tp sword in brawl and beyond. Simple as that.
His primary weapon is only really a sword in WW, which he doesn't use till late at the end. He doesn't have a primary weapon in TP as he simply stole the weapon to basically show off his power and inability to be killed. He attacks physically throughout the game and shows a bit of vague magic as well. And then he transforms into Beast Ganon and knocks you around a lot. Not even Puppet Zelda, who he controls, is designed as a huge hitter. For that matter, he's slamming into you as Puppet Ganon in Wind Waker and shows no real magic usage to any real degree in that game. He's pure physical. Including punches. It's a canon thing for him to punch. He definitely should be keeping his punches, even with some move changes.
As far as the stolen sword, I really don't see the issue. His sword was gone obviously because he had been captured and they don't let prisoners keep their weapons, so he killed a sage and took one. Is that really so untrue to his character that it would be weird to have in smash? If anything it fits his origin as king of the gerudo thieves.
He doesn't have an actual Sword in OOT. Ganon, his giant counterpart somehow does. But Ganondorf never used a sword once in that game. The tech demo might be what you're thinking of, which was used as the model, and actually is the only sword that would fit his character design in Smash if you want to actually keep the point of him being a powerful warlord in Smash.
I'm not sure how handling multiple weapons represents courage. I think it just represents link like swords and magic represents ganondorf. I think you need to replay the oot Ganondorf fight because he was not a fist fighter. Not even a little bit. The one attack people point to as a punch is the shockwave, which is mainly a magic attack and is also not in smash.
Except this is how Link is represented in Smash. He is the holder of Courage and has many tools to fight. It's impossible for him to show literal Courage within the context of a fighting game without a more proper story mode. So they chose him to represent his other major iconic design, being a master of weapons/items. Zelda is the holder of Wisdom and the magic user of Smash(and eventually the de facto Zelda-series Magic User). Ganondorf is the holder of Power and literally is a powerhouse. He's the strongest character physically.
Finally, if ganondorf is portrayed as using mainly magic and swords in zelda, how is it sakurai's place to say "nah, that doesn't represent this character well" and change how he fights to fit his opinion? He has gone on record saying that he does his best to faithfully recreate characters like they are in their game. If ganondorf using swords and magic means he doesn't represent power then I guess the Zelda developers don't want him to represent power. It's not sakurai's place to change that.
Only in OOT is he primarily using magic. TP doesn't show it as his primary weapon(because it's not even his weapon, as he never had one in OOT either. WW is the first game he has a weapon, which appear to be variants of the regular Gerudo Swords). WW has him primarily using physical attacks(punches, backhanding, choking) and he eventually pulls out his swrods only in the final battle. To be a primary weapon, it has to be the most used and most important. It's not in either TP or WW. The only actual accurate point is that magic is something he heavily used in OOT. And it's clear that his artwork shows he absolutely will knock someone's lights out, so that already was intended at one point for the character and his characterization. All that happened is it came up naturally in a fighting game.
Ganondorf is first and foremost considered an evil wizard, and he uses swords primarily as well. He does not punch link in Zelda, so why should he punch him in smash? And maybe if you stretched it you could make the argument that he should have half of his moves be punching and kicking, but it doesn't excuse having no sword or magic at all.
...Wut. He literally knocks Link for a loop in WW(before pulling out his two swords, even. Which was a one-fight wonder, where he physically assaulted Link more than once in the same game. His primary thing was physical blows with only using his body in some way. Even Puppet Ganon fights more like that. A good swordfight is just for fun and one of the things that is expected out of a Zelda game, again, for fun. With sword fights being quite common in the series, well). He never once primarily used a sword(magic, yes. In OOT. But otherwise physical blows in TP and WW were more of his main style. The Sword of Sages was used first in order to add insult to injury. It was more for symbolism than anything else).
And this is meaningless anyway because there's no reason he would be based on captain falcon if he was new in brawl anymore than girahim would be based on marth or Greninja would be a sheik clone, even if he was for some reason given a punch based movesets. Thank you for giving me a real argument though.
He barely got in Melee due to circumstances. His chances of getting in Smash beyond that weren't high to begin with. Sakurai never intended for the character to get in. It wasn't even really on his mind to begin with. Which may also be part of why he keeps him a clone, as he's not high priority to heavily update with new moves. He got a bit in Brawl using the Flame Choke, inspired by WW and TP's chokeholding moves. It was just luck he had a workable model. Without that? There's a pretty fair chance he'd be no more than a trophy. We'd probably have seen WW Ganondorf if anyone, due to more fighting potential. TP Ganondorf fit the clone mold better, so that's what was used to update him.