I swear there was an old Q&A with Sakurai from in between 64 and Melee where Japanese fans sent in questions, I can't find it anymore, but I remember that someone asked if Mr. Saturn could be playable, and Sakurai answered that he didn't think it'd work given its lack of hands. Only thing I found that can sort of back up this memory is
this old poll from around the same time where Mr. Saturn topped the Mother requests, so apparentely some Japanese fans really liked the idea back then.
I do agree though, Mr. Saturn in general just fits better as an item with a bit of a bizarre effect like it has, I think I'd probably cry if I had to beat one up.