Perhaps they were trying to give other characters a chance. After all, Captain Falcon was top in SSB64 and High in Melee.
Another theory is that they thought they made the knee too cheap in Melee. It was easy to land (well, easier than Brawl) and could be combo'd in with his other moves (Stomp, Dive, etc.).
Either way, Falcon still isn't completely dead. What happened was that they changed his metagame completely. You can no longer be the offensive 'charge-in-and-combo' styleplay (but then again, which character can?) He is all mindgames, that's all.