PS1 isn't in good (read: West Coast) Project M stagelists.
Is it still in Brawl? I don't really follow Brawl that much. . .that game is broken anyway.
As for Melee. . .it's just SUCH A NICE STAGE without the transformations. And things aren't that abused anyway, since characters don't need walls and stuff for large punishes. Most people camp them out anyway. To be honest Fountain of Dreams strongly affects more matchups than Pokemon Stadium.
Fox and Falco shouldn't be an "instant win" on that stage. It's just the players being good. It's definitely a great stage for them, but it's also a good stage for Peach, pretty solid for Puff, good for Samus, amazing for Captain Falcon, not bad for Marth, meh for Sheik. . .idk it's just a good stage.
So to answer your question, the reason it isn't banned IN MELEE is because you can get really good punishes without the walls and stuff (whereas in Brawl you won't be getting punishes otherwise so you need the wall gimmicks and they make more of a difference), and because it doesn't affect matchups that much, especially compared to a stage like Fountain of Dreams.