Toad ( ordinary Toad, not captain ) was my most wanted for Smash 4 ( at least he was my most wanted that didn't get confirmed. Thanks for Little Mac Sakurai!!! ) ...Always considered him one of the most essential Mario characters considering his near perfect attendence, he even had his own game before Captain Toad in Wario's Woods. Not to mention being playable in the most main line Mario games just behind Mario and Luigi. He certainly seemed more deserving than Rosalina and Bowser Junior imo. I even did a little bit of rallying for him on tumblr. Started an ask blog with artwork and everything to raise appreciation ( had to abandon it because it attracted too many weirdos and it stopped being fun. ) But think I have to accept that he's just never going to break free of Peach's moveset... I'm happy that the little guy is actually fighting the good fight with Peach instead of just flailing around as a scared meat shield. Makes me want to try to main Peach again after I abandoned her during Brawl ( for no particular reason )
Captain Toad would be a great consolation prize though... I don't want to count him out of the race because of the New Donk City thing just yet. There's precedent for background characters to still be eligible fighters. People joke about the alphonso thing a lot but I don't see why that's not viable when it's actually a real thing that happened ( not to mention dedede, villager, duck hunt, and donkey kong all being in the background of stages, and power-suit samus being part of Zero Suit Samus's final Smash. )
Add me to the supports.
I'm honestly surprised that Toad, or a Toad, hasn't been represented as a character in Smash. Captain Toad is/was the best chance of that, especially since his bag could have played a unique mechanic. He's also been a playable character in the 2D games and 3D World (Toad, not the Captain necessarily). Heck, you could even have Toadette as an echo fighter - I feel like relegating him to a Peach/Daisy meat shield is just wrong. It doesn't evoke the level of detail in Toads' character that Sakurai likes to go into (since when did Peach shield herself with a Toad in Mario games, and since when did Toad use BAD BREATH to attack?)
I don't think you're wrong about the New Donk City thing. I think if he were to be an assist trophy, he would straight up be debunked. But at the end of the day, the game is still in development, and the screenshots shown for New Donk are based on the development at that time. It's completely possible that Sakurai could remove this element from the stage when introducing Captain Toad as a character. It's not likely, but it's definitely possible.
There definitely became some sort of 'Toad dark age' during he GameCube period;
He was removed from Mario Tennis even though he and Toadette were in the Power Tennis opening on the roster(Wario and Waluigi specifically look at them on the board) and filler like Fly Guy and Parakoopa remained. Utter nonsense.
Toad, although receiving a partner in Toadette for Mario Kart Double Dash was reduced to a secret even though he is one of the seasoned karters replaced in the starter line up by the Baby Mario Bros and Koopa Troopa and Parakoopa for some reason.
In Super Mario Sunshine Toad's role is taken by Toadsworth, and the red spotted Toad is seen wearing a red waistcoat instead of the classic blue. This could have been Captain Toad's humble beginnings but it also was the start of Toad being less about the individual.
As of the Wii U generation though he seems to have regained some popularity with Captain Toad Treasure Tracker, 3D World and the success of the New Super Mario Bros. Multiplayer games proving he has fans. Camelot have even started putting him back in Mario Sports titles(although he should never have been removed to begin with) and even though he's one of the worst Ace's characters competitively, it's good to see Nintendo are realising his popularity is a legitimate thing.
Reading your post about the Gamecube days made me realise something....
Other than all the playable (or unplayable) appearances in the gamecube sports/party games, his decline in use seems to have happened when the multiple Toads became a thing. The moment that you had multi-coloured Toads seems to have killed the original Toad. He ended up becoming a host/tutorial character. Even in 3D World, you don't play as the original Toad, but a blue one instead.
Treasure Tracker and 3D World have definitely done more for him, but I feel like Sunshine and the sports games highlighting that Toads are a species might have tarnished him (and I know Toads have always been a race)
Trying to be careful what I say as I don't want to come off as a Toad racist.....