Eternal phoenix Fire
Smash Hero
You’re basing this on the assumption that one character is going to be better than the other. I understand that you are using Melee as an example, but in Brawl, Zelda was improved, but neither Sheik or Zelda were that good so it didn’t matter. Hampering a players ability to do that kind of ruins players who used both move sets. I’ve seen players use Zelda’s transformation at least for recovery purposes, if not more since she had more solid kill moves than Sheik in Brawl.The problem with transformation mechanics is knowing how useless they are once you've noticed how significantly better the alternate form is. Ever since Zelda and Sheik entered the Smash scene, Sheik has always been the more dominant force, making it heavily impractical to switch back to Zelda, regardless of her longer-ranged recovery.
And then we have the Pokemon Trainer, where his Pokemon are hindered by the stamina system. The stamina system basically forces you to switch Pokemon, and that means you have to adapt to three different playstyles during a single match. While the concept seemed good during Brawl's time, it's probably for the best that it never returned in Smash 3DS / Wii U.
If you can't find a way to make the transformation mechanic be worth using, it should probably be limited to just Final Smashes.
Sheik has been solid for the same reason why Marth has always been solid; good frame data and mobility; essential components in a platform based fighter.
And even if you remove transformations and Sheik is STILL better, then players will just pick Sheik. Lol it’s just repeating the same thing with smash 4 minus having a mechanic players enjoyed.
Quillion suggested taunt transformations. Personally, I’m all for it.