Saying that you won't play your character against Sheik (or Fox, or whatever) because the matchup is beyond horrible is not a good argument for that character being tournament-playable.
Top tier dash dancing is crippling to Zelda because she has no good way of approaching because the space she controls is really small, and there's not a whole lot she can do to interact with that style of play. She can't projectile like Peach to cut off escape zones. She doesn't have a good move that hits above her like Ganon, so she sucks at punishing platform play (and resetting the neutral, provided they stay outside her effective range, which ain't hard). She's slow, so she can't chase people down in a conventional way, and her "approaches" are very punishable by dash dance.
She has to use a ton of prediction, forfeit stage, and gamble her own safety to counter very easy, low-risk strategies the top characters can employ against her because the zones she's good at protecting are in very narrow spots and if she pretends that they're not then she's already lost because she has maybe 4 relevant moves (and awful movement). She's also terrible out of shield, except kind of vs really stupid Falcos.
Oh, and Fox can shine combo her very, very hard because the waveshine chain is super duper easy on her. And leads to a lot of stuff. Provided you decide you want to hurt her and d-smash her (40%+), up smash her (80%+), or up tilt (low percents) it's very easy to get big damage on her from a running shine, drillshine, etc. People think they can up throw > up air and waste their shines a lot, but that's not Zelda being good so much as people treating her like she's another character.
I can understand how you wouldn't come to any of these conclusions by watching Cosmo's matches, but all of that is true.