The guy has a pickaxe that can be used for a lot of his normals and his neutral or side special (based on Treasure Tracker's pickaxe charge power up). His headlamp might be used as a down special to blind and stun the foe for a moment, allowing him to strike without worry.
The Toads as a species have an established connection to mushrooms, so he could utilize certain mushroom based abilities by pulling one out of his backpack, including having some spring mushrooms appear beneath him to give him some short jumps (which, considering some of the unique effects on fighters like Bayonetta, isn't unheard of). He could also have a variation of Peach's turnip pluck, where his are more powerful over all, but are faceless and don't have special properties.
For uniqueness, he could be the smallest heavyweight on the roster, being weighed down by his backpack, but he can get lighter and more agile the more he uses moves that involve taking an item out of his backpack.
There are several different ways you can incorporate Captain Toad as a fighter. And he's a Toad, which people have been wanting for a long while. And I'd say even a tertiary Mario character has more casual appeal than even someone like Fox or Samus, honestly,
That all sounds incredibly boring and simplistic. And the pickaxe is literally just the hammer item.
I really don't see him as anything more than Assist Trophy material.
Maybe I’m echoing from Oppo said in his above post but I don’t think you really presented valid reasoning for Cap Toad to not be included. Link never jumped until BoTW. Neither did Captain Falcon, Olimar, DHD, Zelda, Ness, Lucas, etc. The fact he doesn’t jump in his game is little consequence of having him included.
People said the same thing about Villager in regards to movesets. Even Ryu and Little Mac had resistance due to a fighting-based move set not translating right into Smash. If someone can give Cap Toad a moveset, it’s the people working on smash. And there are some good movesets for the guy floating around the internet.
In terms of popularity, he’s one of the more notable contenders for a Mario franchise spot and technically is next in line. Popularity is important but look at characters like Wii fit Trainer, Rosalina, Greninja, and DHD - they had very little support and popularity merit before they were announced.
I’m not a Cap Toad supporter by any means but I think your argument doesn’t hold up well. Smash 4 changed the entire argument that a character has to have figuring potential, popularity, and iconic merit in order to be included. Your argument would of been logical Pre Smash 4 but post-smash 4 speculation is an entirely different ball game in my opinion.
I don't think you're getting my point, which is that movesets have to be exciting and work well in a fighting context. They can't merely "function", they have to give a reason for people to want to play the character outside of merely pandering to his source material. Little Mac is obviously popular in the west because he's a boxer and the closest thing to a raw fighting shonen protagonist in the game. Where did you hear that Ryu and Mac had resistance because "a fighting game moveset wouldn't work in Smash"? I've never seen ANY such resistance to them being in Smash, and it honestly sounds like you completely made this up just to have a talking point. A fighting moveset doesn't translate well to a game where characters fight each other, but a moveset based on a character who can't even jump in his original game does? I'm sorry but that's the most ridiculous reasoning I've ever heard.
Also, it's not merely the fact that Captain Toad can't jump, but it's that they go out of their way to point out that he can't jump. They designed his inability to jump as a specific character/gameplay trait of his - something intrinsically tied to the character, as one of his "abilities". None of those other characters you mentioned ever had such a restriction. No one said they can't jump, it's just that jumping wasn't really a big part of their games, so they never really did it. And your comment isn't entirely accurate either - Link did utilize jumping in Link's Awakening and Link to the Past, and DHD also naturally jumped into the bushes at the start of a round. You have to understand there's a stark difference between merely not utilizing the ability to jump, and actually being totally unable to jump as a planned, designed part of your character. I get that they could just toss this aspect of him out the window and make him able to jump regardless, but if even his ability to jump has to be debated upon, I just don't see why people think he's interesting or has any potential as a newcomer. He looks and sounds completely boring.
Finally where did you get the idea that Rosalina had very little support? She is EXTREMELY popular and a natural addition to the Mario side of the roster. DHD was a great NES-era pick for fanservice sake, and Greninja was a shoe-in because in addition to being a mainstay of the anime, everyone knew that gen 6 had to be represented in some way by a starter evolution. This is also why I think the next Smash game is guaranteed to have Decidueye or Incineroar. The only one I kind of agree with you on is Wii Fit Trainer as she was both poorly supported and poorly received, but still, that's one out of four.