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I think the reason Paper Mario and the other Mario-related types aren't used boils down to the already available Mario characters. We've got 4. Once you can make a full-slot battle with different characters, chances are you won't be needing to add any more new characters.

Move-sets, on the other hand, could be changed dramatically. Luigi could use his vacuum as a standard B rather than a fireball, and suddenly he's entirely different from Mario's move set. Link's FS could make him go Fierce Deity. Ganondorf could use his sword and get all sorts of cool projectiles (and remove his Falcon-clone status). Toon Link could fly higher using the Deku Leaf (sort of like Pit's wings) grapple opponents using that Beetle in Skyward Sword, roll his bombs rather than throw them, and even change his forward B to a sort of wind-push from the WW and jump higher with the Hurricane Spin (and move along the ground with it).

As for new characters nobody's heard of: Starfy. It'd be the first character to be more useless than Jigglypuff.

Link from the majora's mask would be awesome.
b + down to transform into deku, zora and goron and the final smash could be fierce deity.

I would also like to see another character from the metroid series, like dark samus.