Personally, given the context that the tournament was a no-customs tournament, I think the ruleset was actually really lenient and was the most ideal situation you could get. I mean, think about it this way: when custom moves are set to off, you rely a lot more on your ability to switch characters in a bad matchup rather than switching custom moves. In, say, a Kirby vs. Villager matchup, you can't suddenly switch out your down-B into meteor stone to counteract Villager's recovery. By the same token though, Captain Falcon doesn't become less viable because of his lack of good custom moves. The point I'm trying to make is that every character is restricted to one set. And though I think it would've been nice to give Palutena the same access the Miis have, restricting one set prevents giving Miis a matchup advantage other characters just wouldn't have access to. However, MLG's ruleset also allows the Miis to actually be viable, allowing a player to use their preferred set, which is usually a lot more viable than default weight + 1111. You essentially make Miis viable while simultaneously not giving them an unfair counterpicking advantage (allowing them to switch out their custom moves when no other character can do the same thing.) The only downside I see to the rulest would be in a case where somebody mains multiple Mii types, so they can't play as both Brawler and Gunner. However, these types of people are so few and far between, that I think it's pretty much a non-issue in all but the rarest of cases.
tl;dr, For tournaments running a non-customs ruleset, the treatment of Miis in this scenario was the way to do it.