Anyways, in relation to your own story idea, Hex, I've thought of an idea to implement Crazy Hand as a sort of sub-plot character to the main storyline while retaining Master Hand as the final boss.
Basically, there are specific points in the story where Master Hand would normally change the progess of events regarding certain characters. For example, as you suggested, he could swap Link and Mario's places and have them fight in the other's world for the other's goal - he is the Master, he controls all up to the point when characters realize their potential.
However, at some of these select points, the player can trigger Crazy Hand to appear instead of Master Hand and shape the story and world of the characters in his own different way.
Given that Crazy Hand is... well, crazy, these transformations would be unpredictable in nature and lead to alternative story scenarios. As examples of this:
A Mario Versus Bowser Fight: Under Master Hand, the brawl is your average, classic Mario Vs. Bowser duel. Under Crazy Hand, Bowser halfway through the battle transforms into Giga Bowser, greatly morphing the challenge of the boss battle.
Fire Emblem: This is a more extreme example, but an example nevertheless. In the Fire Emblem games, when an ally dies, they can never be retrieved. Suppose Ike and Marth were fighting against the Black Knight in one segment of the story, and Marth fell back onto the ground, struggling to keep up. The Black Knight raises his sword and is about to finish Marth.
Under Master Hand, Marth dodges in the last second and the fight continues normally with both Marth and Ike victorious and alive. Under Crazy Hand, the Black Knight successfully "slays" Marth, transforming him into trophy status. The Black Knight follows his initial attack with a final strike at Marth's trophy, shattering Marth's figure and rendering him dead and irretrievable. Ike then defeats the Black Knight on his own. According to this take on the story, from this point on, Marth is dead and is no longer a playable ally on your Adventure Mode team; Ike must continue on by himself.
Bramble Blast: This example plays on both Nintendo nostalgia and the crazy side of Crazy Hand. Suppose Diddy Kong is progressing through a DK-themed level similar to the classic Bramble Blast level of DKC2, but of course with a different layout, graphics matching up with the rest of the game's levels, and with this Brawl remix of Stickerbrush Symphony playing.
Under Master Hand, this level progresses normally and doesn't change from it's basic design. Under Crazy Hand, at one point in the level, the stage tranforms into an exact replica of the Bramble Blast level from DKC2 - graphics, layout, the original music, everything but Diddy Kong's graphics. The level, at the end of this Bramble Blast level, transforms back into it's normal form at the very end of the level. The story progresses the same after this level as it does with Master Hand, but this particular level is transformed.
Those are just some examples. Under this concept, Crazy Hand wouldn't necessarily be a main villain in the story, but a sub-plot that introduces alternative story and level scenarios - which would increase replayability as a side benefit.
