Given that Smash Bros. don't care at all about the Pokémon Logic, would Blastoise still stand a chance against the whole roster of epic character we have

? Even with Pit's 'Transform the game into a bullet-hell fighting game' ?
As for the fact they made Squirtle in Brawl, in my opinion, it's totally random. They could have indeed made Blastoise (Like Charizard, it would fit the game nicely), or Venusaur (I have no idea of moveset for him...

). That's what the developers' wanted I guess.
Also, as you said before
@Reece and
@Artisan, we need a Mother/EarthBound character. That would expand the roster nicely, and I think they were nice (Ness and Lucas) to play as, due to the diversity of attacks you could do.