I think people are getting the “Nintendo was shocked by fans being angry at Isaac’s AT” the wrong way.
I see a lot of people here say that it’s because Isaac wasn’t on Nintendo’s radar and they didn’t know how popular he was. You may be right that they could’ve underestimated his popularity, but if they really didn’t know how popular he was, then why did GS get the abundant amount of content it has gotten? You need to realize that we went from having literally nothing in Smash 4 except for like 1 ripped music track, to having everything but a character, stage, and new music in Ultimate. I think Sakurai and his team and Nintendo know that Isaac is a popular choice among Smash fans and has a large GS fanbase. Isaac probably did well on the ballot to justify it.
However, what I think is happening instead is that Nintendo is now realizing what being an AT or new costume can mean to a lot fans. For Nintendo and Sakurai, AT’s are meant to be compensation, the next best thing to being a fighter that fans would appreciate. Hell, a lot can move, do multiple attacks, get grabbed, launched, be hit, so they really went out of their way to make them feel more special. But to a lot of fans when they see a new AT being shown off for the first times, one of the many things that first come to mind are, “they’re not going to be playable”, “they’re deconfirmed”, “it’s over”, “why is X not playable?”. A lot of people are fine that their character got to actually be in the game at least, but a lot of fans also feel that that’s it, there’s no other choice but to wait for the next game to even have a chance, and thus being an AT is treated like a death sentence. I think that’s what Nintendo started seeing that’s how some fans see AT’s as.
And as for what Polar Panda said, I don’t see it as the sole reason for why Isaac isn’t in, but one of couple others that ended making him lower priority. There wasn’t a lot of man power or time for newcomers this time, seeing how we only got 4 new stages and 6 brand new characters, and Isaac not only would he need to be a unqiue addition, but also would’ve had to bring a stage and new music since he is from a new series. Isaac would’ve ate up a lot of time, and with GS’s dormant status, it was another reason to not include him.