Okay, I'm tired of people saying that because Link and Zelda have their Twilight Princess models in Brawl, and the fact that Sheik is not in Twilight Princess, Sheik will not be in Brawl. Some people think it will mess up everything canon. I'll explain why all of this mean absolutely NOTHING.
Firstly, Super Smash Bros. games are not canon. Therefor, anything can happen and it won't have any affect whatsoever on the actual game story.
Second, consistency is not important in Super Smash Bros. Even though almost everything Zelda-related in Brawl if in Twilight Princess form, including Link, Zelda, Bridge of Eldin, and the Heart Container, there are still references to other Zelda games.
For example, the Temple stage based on Zelda II is back. A Deku Nut, an item only in Ocarina of Time and Majora's Mask, is now an item in Brawl. Zelda still has her Ocarina of Time spells; Nayru's Love, Din's Fire, and Farore's Wind.
And then there's this:
Notice Zelda does NOT wear a headdress in Twilight Princess. This is the same Kirby hat from Melee, straight from young Zelda from Ocarina of Time.
However, as most of you probably know by know, there has been a leak that states Zelda's Down Special is, roughly translated from Japanese, "Twilight Change (Original Twilight version of Sheik transformation)".
Now, many people think this mean Zelda's "Sheik" form will be replaced by "cloaked Zelda" from Twilight Princess with a similar moveset.
As this does sound like a good idea, this does not mean that Sheik as we know him/her/it/potato will be gone. Sheik will definitely get a makeover, but I very much doubt that he/she/it/potato will be replaced with "cloaked Zelda". I can see the new Sheik having a similar look, but definitely not just a cloaked Zelda. There is evidence to support this "cloaked Zelda" replacement, though.
If you've played Twilight Princess, you may have noticed a symbol on the back of Zelda's cloak. This symol is, indeed, the symbol of the Sheikah race, of which Sheik is supposed to be part of. (Sheik is not really a Sheikah; she is just Zelda in costume taking the form of a Sheik. Thus, Sheik is actually Hylian.)
So, there is a small reference to the Sheikah (including Impaz, supposedly the last remaining Sheikah), and one could say it also refers to Sheik. However you see it, it doesn't matter. Sheik does not have to be in Twilight Princess for her (I'm just gonna stop using he/she/it/potato) to be in Brawl.
One last thing. Many people think that it might be a good idea to make Sheik a separate character from Zelda. This cannot be, though. And I can prove it with two words: SubSpace Emissary.
Even though Smash Bros is not canon to other games, it should have it's own canon story. What would happen when Zelda comes across herself in costume in Adventure Mode?! Chaos, that's what. Even though Smash Bros. in general doesn't make much sense, a unique and original story should. This is why Dr. Mario is going to be removed (and if you think otherwise, someone needs to slap some sense into you.) This is also why Paper Mario (a character that I once supported until I thought about Adventure Mode) has a very slim chance. Maybe another Paper Mario character will get in, but not Mario himself. Two Marios = wrong.
In the case of Young Link, though (assuming he comes back as cel-shaded Link), he is a completely different character. Young Link from Melee was the same Link from a different time. This new Link, however, would be totally different from the Twilight Princess Link. They are completely different people, from two different times and places. I can see a time travel-related event happening in Adventure Mode causing them to meet.
Anyway, this is why Sheik cannot be her own individual character.
In conclusion, Sheik is definitely returning, and she is very likely to be Twilight Princess-esque, possibly similar to "cloaked Zelda", but not the same.
Firstly, Super Smash Bros. games are not canon. Therefor, anything can happen and it won't have any affect whatsoever on the actual game story.
Second, consistency is not important in Super Smash Bros. Even though almost everything Zelda-related in Brawl if in Twilight Princess form, including Link, Zelda, Bridge of Eldin, and the Heart Container, there are still references to other Zelda games.
For example, the Temple stage based on Zelda II is back. A Deku Nut, an item only in Ocarina of Time and Majora's Mask, is now an item in Brawl. Zelda still has her Ocarina of Time spells; Nayru's Love, Din's Fire, and Farore's Wind.
And then there's this:
Notice Zelda does NOT wear a headdress in Twilight Princess. This is the same Kirby hat from Melee, straight from young Zelda from Ocarina of Time.
However, as most of you probably know by know, there has been a leak that states Zelda's Down Special is, roughly translated from Japanese, "Twilight Change (Original Twilight version of Sheik transformation)".
Now, many people think this mean Zelda's "Sheik" form will be replaced by "cloaked Zelda" from Twilight Princess with a similar moveset.
As this does sound like a good idea, this does not mean that Sheik as we know him/her/it/potato will be gone. Sheik will definitely get a makeover, but I very much doubt that he/she/it/potato will be replaced with "cloaked Zelda". I can see the new Sheik having a similar look, but definitely not just a cloaked Zelda. There is evidence to support this "cloaked Zelda" replacement, though.
If you've played Twilight Princess, you may have noticed a symbol on the back of Zelda's cloak. This symol is, indeed, the symbol of the Sheikah race, of which Sheik is supposed to be part of. (Sheik is not really a Sheikah; she is just Zelda in costume taking the form of a Sheik. Thus, Sheik is actually Hylian.)
So, there is a small reference to the Sheikah (including Impaz, supposedly the last remaining Sheikah), and one could say it also refers to Sheik. However you see it, it doesn't matter. Sheik does not have to be in Twilight Princess for her (I'm just gonna stop using he/she/it/potato) to be in Brawl.
One last thing. Many people think that it might be a good idea to make Sheik a separate character from Zelda. This cannot be, though. And I can prove it with two words: SubSpace Emissary.
Even though Smash Bros is not canon to other games, it should have it's own canon story. What would happen when Zelda comes across herself in costume in Adventure Mode?! Chaos, that's what. Even though Smash Bros. in general doesn't make much sense, a unique and original story should. This is why Dr. Mario is going to be removed (and if you think otherwise, someone needs to slap some sense into you.) This is also why Paper Mario (a character that I once supported until I thought about Adventure Mode) has a very slim chance. Maybe another Paper Mario character will get in, but not Mario himself. Two Marios = wrong.
In the case of Young Link, though (assuming he comes back as cel-shaded Link), he is a completely different character. Young Link from Melee was the same Link from a different time. This new Link, however, would be totally different from the Twilight Princess Link. They are completely different people, from two different times and places. I can see a time travel-related event happening in Adventure Mode causing them to meet.
Anyway, this is why Sheik cannot be her own individual character.
In conclusion, Sheik is definitely returning, and she is very likely to be Twilight Princess-esque, possibly similar to "cloaked Zelda", but not the same.