This is how I did it: (from Cheatcc.com)
# Unlock all characters easily
Use the following trick to unlock all characters in under two hours. Enter VS. mode, and select Special Match mode. Set it to Stamina and Flower modes. At the character selection screen, give the CPU 1 health and your character anything over 1 health. Also, make sure that it is on 1 Life Stock mode. Set the map to Shadow Moses Island, at least until Snake appears and you defeat him. Keep playing this way for approximately two hours and you have around 500 VS. mode games played. By then, you should have unlocked all characters. Note: Make sure you are using a character you are good with because after a certain number of rounds, you will unlock each character and have to face them in a fight. It is 1 vs. 1 -- so it is recommended that you use a character like Ike, who hits very hard. However, do not worry if you lose; after one more VS. mode round, you will get to try again. -From: Austin Raynor
I unlocked everyone that way in under two hours. Although it's annoying to do, its not bad if you watch a movie while you spam the Start button. Cheers.
