IMO she's still in the high tier.
The Fair is godly, and it a nice way to end a combo, but sheik has so many other options besides it. The Uair is underestimated, and can kill floaty characters or extend a combo. The down throw is still awesome, and the D-smash can still send people flying if hit right.
I didn't even bring up the needles yet.
What makes Sheik so amazing is that she flows well. Each attack can be chained to the next one. She easily has some of the best comboing skills in Melee. To drop her down a tier because of one move lost, however godly that move is/was, would be foolish.
It'd be like dropping down Marth a tier if his F-Smash was different. That attack is a C-stickers dream, but real Marth players know that his aerial game is excellent, and his tilts are pretty sweet.
my 2 cents.