I think it's a little bit unreasonable just because of the fact that you're choosing to exclude the entire series, a body of work that spans thirty years for that series, because of one complete piece of **** who has been the composer. It's not uncommon to see people say things like separate work and politics and stuff to this day, and is particularly an attitude I've noticed in my life with older generations of my family for example. I don't know the cultural standards of that sort of thing in Japan, but I imagine it's quite different than how we look on things these days. In the States these days, we tend to call for people's heads when they make certain comments. I suspect Japanese standards are quite different, seeing as they have a different cultural lens. You can't expect them to necessarily approach such a situation in the same manner.
I'm not inclined to believe Nintendo or Square Enix want to deal with that sort of negative publicity or even seriously think about it. I don't see anything that would indicate that they would confront that situation, and Square specifically is likely stuck with Sugiyama given his place in the franchise as the main composer who enjoyed a good status. He's also 87 years old, so, it kind of makes sense why they wouldn't deal with it. Why make a big fuss of that scenario when you can just let time take its natural course? I'd say much like Uematsu, he's just too deeply ingrained in the DNA and rights of Dragon Quest to cleanly break from despite issues.
And again, you invalidate the legacy of the game and every other person involved for the political beliefs of one person. Many of those people have seemed perfectly reasonable and nice too at that. You're allowed to have your stand on this, but to demand it of another company that isn't even in your home country I think is somewhat unreasonable. If they didn't drop him when this stuff came out, they clearly intend on doing nothing. I know it's ****ty from our perspective, but he's really just one person. An old, bitter man at that who likely grew up with such propaganda given he actually survived the war. Square will likely not have to deal with him for too much longer.
Square has exactly no reason to give a **** about Geno unless Nintendo offers them something enticing. That's a hard, honest truth about him I think at this point. Maybe they're aware of the support for Smash, or they could be completely unaware seeing as Smash isn't their game and they just make a little extra profit on it. I seriously doubt Square has seen any results of the ballot, and they're not the type of company to exactly give in to fan demand or pay that much attention, we still don't have the Final Fantasy VII remake after all this time. I suspect Crono and Geno might as well be buried for them at this point. So, no issues using them as leak bait. Especially given, again, I suspect the opinions of Smash fans are quite possibly one of their smallest concerns.
It's not cynical to them, it's just business. And we really shouldn't look at it any other way. Besides, Nintendo picked who they wanted to include as far as we know and they've never been turned down. You're turning your frustrations all over the place and towards people without knowing details dude. Calm down for a bit.