I never really thought most of Melee's models looked that bad at all, tbh. I fail to see what's wrong with the Yoshi model, even though future appearances are naturally updated and improved.
Well, I will admit consider every appearance of Fox and Falco after Melee a major improvement. Falco particularly, Fox looked okay apart from being far, far less detailed.
The only other model in Melee I have any problems with is Bowser's. The proportions in his limbs didn't look right at all. It seems like tried to make him a bit slimmer but very muscular and built, which isn't how he normally looks, he's usually just bulky all around. It still works with his Giga Bowser form, but not in his normal appearance.
Apart from that, everything looked fine to me. Brawl and 4 improved everything for sure, but again, that's to be expected.
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As for ARMS....yeah, I still don't think they've got a good chance just yet, and they may not get a good chance later either. Give the game some time to age just a little bit and see how well it does, because it's still very new. Unless they decide to include a character for some promotional reasons or just for the heck of it, which is unlikely, I don't see many reasons for one of the characters to be added to Smash at this time.