I wouldn't be surprised if Cappy made an appearance. Like in a special move or something. But I think he would make about as much sense as Navi as far as being a full on fighter goes.
I could see him as an item that you get to use on another player, giving you a few seconds of control over them but you are vulnerable, keeping it from being too OP
I think as a move from Mario and not its own item or character. Either side b or new final smash.
Side b wouldn’t take control but maybe final smash would.