The rumors of a DQ character started without Slime because the name Yuusha/Hero was literally in the files as an upcoming character. The rumors had no time to manifest into Slime because we already knew the DQ character getting in. They started with Hero
We know Sakurai did have Slime as a backup, though. He wasn't sure if SE would be okay with adding Hero
Fair enough, although it's not that much different from those "what if we chose a recurring element like chocobo/jack frost/anna that no one really cares about instead of...the actual protagonists leading said popular games". And this is one of those scenarios where i'll take sakurai's words with a pinch of salt - he gets to say whatever he wants after he got the DQ heroes in, but his actions speak much louder than his words with the character choices.
Dragon Quest was a topic of discussion before the Yuusha leak, which often led to Slime being called just as likely (or moreso) than Erdrick. Once Yuusha was out there, Slime was pushed aside and Erdrick stepped forward as the obvious choice though. It's kind of amazing how much of FP1 and base kind of got out, largely because of Nintendo's own mistakes, only to be left with crickets by S2.
The idea of pulling for a character besides the obvious one isn't perfect for every scenario. No one ever expected (or asked for) Kairi instead of Sora, but fighting games are a major example where the main face of a franchise isn't necessarily always the one people gravitate to. Like, sure, no one wanted Choi over Terry, but they sure fucking would go for Nakoruru over Haohmaru, or Scorpion/Sub-Zero over Liu Kang, and even though I expect Kyo for KOF, I wouldn't be surprised if it was Iori or even Shun'ei. In very niche occasions, this can be applied to other genres as well, since I wouldn't necessarily expect Nina Williams over a Mishima (though which one was definitely up in the air), but if Breath of Fire was suddenly getting the call-up... Maybe that Nina, a recurring staple alongside Ryu as a deuteragonist throughout the entire series, wouldn't be far-fetched. Edelgard also being a popular choice lines up, considering either she's on your side or she's the main villain no matter what route you take. She's not just absent for players of the other routes.
DQ was oftentimes set aside whenever a squeenix character was brought up - it was more or less the usual suspects raised (geno, sora, another FF character, crono) within the smash forums. Afaik only Ryce and BGBW were the only ones in the previous threads who brought up the franchise as a possibility (and not slime specifically).
If anything, the fighting game choices included have been in stark contrast with what you've said - we got Ryu over any other "more popular" characters like chun-li/cammy/juri, we got terry over mai (no shit) and even if people "expected" heihachi we got the main protag/antagonist of the series anyway (you would even consider that to be a point that the devs go for the most recognizable leads even!). I think it says
a lot when out of all the dlc characters, only 1 of them were considered a "side character" in any sense of the word (joker, banjo, terry, byleth, steve, kazuya and sora are the leads of their games, pyra/mythra are deuteragonists even when we knew sakurai considered rex first and cloud was already in the game....so that only leaves minmin as the only odd duck out).
I
don't have any intention to go into "i can see so-and-so getting in" cause that's going into the realm of wholly subjectively arguments, but there's been a really clear trend on Nintendo and sakurai's choices, like it or not. And i'm honestly not surprised - outside of niche forums people are not going to care as much about random side characters compared to the leads. These are huge investments where you need to spend time and effort, not to mention what these 3rd parties would want as well.
Also, I'm not sure why Sephiroth has to be the second FFVII rep. That goes against the usual "protagonist->other protagonist(s)->villain" pattern of character selection in this series, anyway. As I mentioned years ago, Barrett's competition by that line of thinking would be either Tifa or Aerith.
Personally he's definitely the most recognizable one outside of cloud - he's most prominently included in crossovers involving FF7 (KH, dissidia) compared to the rest, any side media is still heavily based off him (advert children was based off shitty clones of him running around) and sakurai pretty much considers him as the most recognizable villain in gaming history outside of bowser (hard to argue otherwise).
It's a bit like the Chun-li? No one seriously thinks that say, bison is anyway near the latter's popularity and iconic-ness. It's not so much about side protagonists or villains having a specific order.
I'm not saying Mihoyo is the only exciting thing they could choose but rather it's probably one of the more surprising picks. We've discussed so many classic and legacy franchises for Smash representation that I do think putting in a character from recent gaming trends like Genshin Impact would probably be something that feels more surprising as I think most people would dismiss it as a meme like how Minecraft was before Steve finally got in
I think that Sakurai knows he can't do classical picks all the time, so I think he'll have a mix next time.
Possibly? I do think something like fortnite or genshin could easily make waves (that are more modern), although people seem to be pretty wary or think it's too early (which is fair). That said, they did ask for Minecraft 4 years after its release so maybe?
