Over time, I grew fond of the idea of Palutena.
Reasons why I did:
1. Palutena is the Zelda of the series (literally in Japan, as the series' title has her name).
2. She is in ALL Kid Icarus games, compared to Medusa's two, and Magnus' one.
3. There is going to be an anime for Kid Icarus that has her as the main protagonist and she will actually FIGHT. (There are two others, one for Pit, one for Medusa, although Medusa's is just a story of what happened after her previous defeat.)
4. Palutena was reintroduced in Brawl like Pit was, and even appeared in the SSE.
5. Typically, a secondary character is added next before a villain. (Luigi, Diddy Kong, Zero Suit Samus technically, etc.)
6.. *WARNING! BIASED REASON!* She's pretty damn hot.
As for why a 2nd Sonic rep, it's because unlike the crap people spout off, Metal Gear and Sonic are NOT exempt from having more than one character. But between the two, Sonic is the only one likely to actually GET a second character due to Sonic being added for popularity, and the crossover SERIES it has with Mario.
As for why Tails, it's because Tails is usually the "Player 2" of the series, and because of the old Sonic and Tails in Melee hoax, the idea of his addition isn't received all that bad. Not only that, but it'd be harder to make a clone out of Tails than it would be to make a clone out of Knuckles or Shadow.
As for the "Retro" business, being "Retro" means nothing. No one (except the Ice Climbers) was added BECAUSE they were Retro.
Game & Watch? To honor Gunpei Yokoi, and because he's technically the first Nintendo character.
Pit? Fan demand. Also he doesn't qualify for Retro anymore due to Uprising.
R.O.B.? He saved video games in the Western market. Not only that, but he's an icon and cameoed in MANY games before Brawl, notably Mario Kart DS as a playable racer.
The Ice Climbers were added soley on being Retro characters, as Sakurai was specifically looking for a character to add from the NES days in Melee.
Going by this, the only three choices we have are:
Takamaru, as Sakurai favors him, and said he would be considered if he appeared again. Since then, he's been in Captain Rainbow and had a guest appearance in a mode dedicated to his title in Samurai Warriors 3. And it's rumored that he's the star of the upcoming game Nimble Sakura Warrior for 3DS eShop. If this is true, then he is no longer Retro.
Duck Hunt Dog: Simply for being an icon. Sakurai might not see the potential we see in him, though.
Muddy Mole: Sakurai adores this guy, and even stated that "he might be in the Roster already!" before Brawl was near finished. Whether it was a joke on his part or whether he actually sees Muddy as a potential rep remains to be seen. But given that he WASN'T in Brawl after Sakurai said that, it may not be so likely.