Hello, I am aware of the situation somewhat, but even with your explanations, I don't think I know enough for my opinion to give much weight. And if you tell my opinion to others, then you should include that I give it only weakly, and don't feel I know enough to say with any confidence.
Banning is a last resort, and should only be done for the reason of "too powerful" if you are damn sure. 99% of things claimed to be too powerful turn out not to be. The evidence suggests that Metaknight is in the other 1%. Further, the ledge grab limit situation is a horrible one, where some subjective (not discrete) rule is needed to just to allow the character.
Players shouldn't be put in a situation where they must keep track that they have done 24 ledge grabs that round, or something. That problem also points to banning, because at least "don't pick metaknight" is discrete.
Another problem is that banning a too-powerful thing does not even guarantee a better game. Perhaps some other character (Snake?) is just as dominating over the rest, and would have no Metaknight to keep him in check. I would guess that this isn't the case though, and that the game would be better without Metaknight. You would know the answer to this more than me.
If this one character is really destroying the competitive scene, then it is ok to do something about it. Just be sure about it.
--Sirlin