You are putting Geno on a pedestal, im pretty sure Square does not care for Geno as if he is Cloud, Sora, Tidus.. or any other Major Square Character. Since Geno is part Nintendo anyway, giving Geno to nintendo as a cameo would probably not cost anything. The Journal entries does not mean he wants him as playable, he could want him for something else.. maybe a awesome AT. Since unlike Pokemon they have different moves, and abilities.
Cloud and Sora barely qualify because the only Nintendo game they appeared in, Kingdom Hearts: Chain of Memories, stopped being a Nintendo exclusive in 2006 when Square Enix released the Final Mix of Kingdom Hearts 2 (on the PS2) that included a 3D version of the game and Tidus has never appeared on a Nintendo platform thus killing his chances.
You're right, Geno is a character in a first party franchise but Square Enix still owns the rights to him and thus Nintendo can't use him without paying SE "rental" dues. Granted, Geno's worth is much less then the characters you forementioned so his cost would naturally be much less but that cost still exists none-the-less.
The 290 entries that appear in Sakurai's journal consist of the entries in the offical Brawl poll that Sakurai and his staff found the most interesting/ most amusing. Geno appeared in 5 entries and tied with King Dedede for the most mentioned character. Let's look at some other characters that were mentioned 3-5 times:
1. King Dedede (5 entries, confirmed)
2. Ike (4 entries, confirmed)
3. Diddy Kong (4 entries, confirmed)
4. Krystal (4 entries, semi-confirmed)
5. Ridley (4 entries, confirmed to at least be in the game)
6. Captain Olimar (3 entries)
Notice anything? Did you notice how all these characters are from different franchises? Did you notice how many of these characters were highly requested even before Brawl was offically announced? Did you notice how all of these characters play important roles in at least one canon game? There are many other similarities that can be seen among these top picked characters.
Also, like I said in another post, all the ATs that have appeared so far either didn't appear in Sakurai's journal at all or were only mentioned once. It should also be noted that no character that has been mentioned 3 or more times has had anything major shown against the possibility of their inclusion.
Also, I'm going off what we've been shown and I'm not putting Geno on a pedestal. If it weren't for the things we've been shown and the journal entries, his chances would absolutely suck but that's not the case. I've also stated in other posts that there are definately other characters that have higher chances then Geno but, currently, the only real competitor he has when it comes to Mario characters is Paper Mario and seeing how the Mario franchise will most likely have the most characters like it did in Melee and how Dr. Mario is practically guarenteed gone, the possibility of both of them becoming playable isn't farfectched.
*add in* If you think about it, what do Snake and Sonic have in common besides the fact that they are third party characters and have had Nintendo exclusives? They have made references to first party Nintendo games in at least one of their games. In Metal Gear Solid: Snake Eater, both a bobble head of Yoshi and Mario appeared and, as we all know, Sonic and Mario recently appeared together in Mario and Sonic at the Olympic games. If you think about it, wouldn't this make Geno an appropriate addition for Brawl? How many characters out there can claim to be both a third party character and a Mario character, Nintendo's biggest, oldest, and most successful franchise? Considering how Brawl celebrates Nintendo's history, what better way to show what Nintendo and Square Enix have done in the past together then have someone like Geno or Mallow as an addition?