...Wavedashing was "invented" by a Luigi player (whose name sadly escapes me) from California and yes its discovery was an accident. This of course makes sense since I'm sure people had done it before on accident (I've even seen the computer do it a handful of times), but with Luigi it is by far the most noticeable. I don't remember the exact story, but I think it involved trying to quick item catch (back then California was by far the most vehement pro item tournament scene) as doing the jump into the air/dodge/catch was a safer method than standing catching, but Luigi's regular jump left him open to nasty counters thus the need for the short jumping. Again it's a bit fuzzy, but the move did catch on amazingly fast with every player trying to add it to their repertoire. Ironically the move really didn't become absolutely necessary for top level competition for months down the line.
It's hard to say exactly when the game became as completely dedicated to speed as you see it today. I would have to say that Ken is probably the largest catalyst. His "dash dancing" dramatically speed up the pace of matches. Before matches were much more measured and planned out. The best counter to "dash dancing" is spamming short jumps. Players certainly knew how to do it, but with the exception of short hopping Falco's lasers it wasn't really put to full use. I would say that Eddie was the first to feature a repertoire of almost exclusively short jumping to L canceling. This was what was so revolutionary about how he played Ganon, he could make him fast. Whether or not due to Eddie's influence, you start to see players like Azen and Ken like wise start abusing quick short jumps with characters like Fox, Sheik, and Marth. However, it was probably Isaiah that showed that every character could benefit dramatically from incorporating quick short hopping with his surprising Samus, DK, and even Kirby. It really lead to the point in which a lot of characters are played dramatically similar. I remember hearing complaints/praise of Azen that said he could play almost every character at a very high level, but he pretty much played them the same. However wavedashing still wasn't an absolutely vital tournament tool. You would occasionally see "wave dashing", but outside of people who played Luigi and to a much lesser extent Samus and Marth, it wasn't used that often. Ironically perhaps the first person to demonstrate it as a possible tournament dominating form was Mike G’s Peach. To my knowledge he was the first player to consistently use wavedashing to such a dominating effect in tournaments. From that point on you start to see people playing remarkably similar to today’s player.
As I stated earlier my memory has some gaps. For example I have next to knowledge of the European scene and how it has interacted with the American tournament scene. I’m also not particularly well informed about East Coast tournaments. Maybe you can rope one of the EC old timers in. Anyways I hope that answers some of your questions.
