So this is what happens:
Dr. Mario and Young Link are sacrificed for Diddy Kong. He had high demand, he is much loved, and is very important to his franchise.
Pichu and Roy are sacrificed for Ridley. Ridley is the only character who is on this roster who isn't in Brawl. The guy appears in the opening, which was also the trailer, and even back then he had some demand. Plus, I need to satisfy my ego somehow.
Ice Climbers are cut for King Dedede. Dedede is much more important to a Nintendo All-Stars game in general, and had quite the amount of demand to make it in over a gimmick character. G&W and even Marth represents Nintendo's early days well enough on his own anyways. Ice Climbers can wait 'till Brawl where they can join Pit as retro characters.
Mewtwo is cut for Charizard. Charizard is more popular, more iconic, and should get in over both Jigglypuff and Mewtwo in every occassion.
Peach is cut for Wario. Wario is counted as a Mario character in this situation, given that Wario Ware was non-existant at this point iirc. Wario had more demand than Peach
i think, and he fits much better as a fighter. Save Peach for Brawl then. Quite the controversial cut, but w/e.
Ganondorf, Falco and Luigi stay as clones.
23 characters, which means 2 less characters overall, 11 unlockables just like in Melee.
It hurts me so to not include Meta Knight seeing as he's my 2nd favorite Nintendo character (only after Ridley,) but alas, due to having to have a snippet of realism he'll have to wait for Brawl.