They're making money off of these suggestions though, through game sales, DLC, amiibo, even hardware sales in some cases - it's unethical to ask fans to give market research data and not give the people who submitted these ideas a small piece of the pie, regardless of whether their ideas are used or not. Typically, with market research like surveys and focus groups, being paid is and should be the incentive, not "making your dreams come true" or whatever pretentious BS you want to spin the ballot as - because it's not "making dreams come true", it's market research in the creation of a product, a company specifically requesting you to inform them of what would make you buy their product and providing an official platform for you to do so, not just some simple fanmail or social media posts that people decided to send on their own.
I don't see any issue with any of how it was handled bar at worst slightly bad wording(Bayonetta's situation is people misreading their actual wording to infer something else. They didn't say she was chosen cause of the ballot at any point. People misinterpreted that entirely. There's a reason they didn't say that in itself). The actual ballot was purely write-in, and far better than trying to gather random data, and it was controlled and had what they want.
Besides that, unethical to use data that was meant for gathering information and... using it to see what fans want? When the whole ballot was about what fans want? That's twisted logic. It's exactly what it was always going to be. None of this is rocket science. If you couldn't guess then that it wasn't a "true winner" crap, you hard knew the second multiple characters were chosen cause of the ballot. The only valid point is that the US translation wasn't as forthcoming about it being used for future Smash products. And them not using the data to see how it could help with their other games is borderline stupid. Good thing they're not, because that's throwing away a lot of good data for no logical reason. There is no ethical problem here. You shouldn't ever vote on anything then, if you're that paranoid. Cause no matter what data you give, it will be used somewhere extra to help figure out potential product or otherwise. That's how everything in this world is. We were at least
told this too.
In the case of the first one... Twitter exists, as does Reddit. If anything you'd get better data from there than pre-centralisation Smashboards since casual fans would be posting there too. The Smash Ballot didn't follow rules either - it very clearly only says "favorite video game character". Nothing about Kratos being off-limits or whatever, despite what a lot of people were saying at the time - every single Smash rule except for "must be a video game character" is a fan creation
They're all horrible places that are impossible to sift through with no self-control. Nah, being controlled was ten times better than trying to find places like that. Way better. At least they got exactly what they wanted, and as it's their information they want, they found a way that actually worked right.
None of those places will ever work as a proper polling, as it specifically had a spot for every piece of information they wanted, and could properly discard anything that doesn't work(like non-video game characters, their only rule). The only good those places would be is for advertising the poll. You vastly overestimate how easy it is to sift through those places for a tiny bit of real information. And most of it doesn't pertain to what they want.
Twitter, besides, is doing very poorly and was not as good of a place as you think it is, even back then. Social Media places were outright crapholes for ages. Never mind many of them don't allow people to actually delve into moveset ideas, just minor "ooh, this could be cool", which isn't helpful. Their purpose was not just to gather names, but to see actual specific details, including design ideas, movesets, and even how people in particular are interested in a character(like what role they play). They even asked for what game they're from, not just the franchise, so they're able to tell very particular things, like which version of a character is more favorable. This cannot be gotten from random Social Media because it ultimately does not have the details they are looking for. At the end of the day, they serve no purpose beyond being a good advertising spot
at best.
And even then, trying to find information on there is laughable. Hashtags cannot be on most posts due to a massive tweet limit(even before Musk took over), it requires multiple tweets to put any ideas down, and it didn't, as I noted above, give them a lot of key information that helps figure out things. It was never a good idea to find random information. Search engines are quite bad these days, outside of finding hard information(of course, that's still just as limited, since many things have yet to be discovered or documented). They're still a crapshoot.