"But the whole point is that items are the neutraliser. Items make characters like Pichu and Mewtwo far more playable. 4 player bouts reduce Marth's dominance of 1 on 1."
If items were the neutralizer, then Bowser would be on even terms with the rest of the cast, he is not. Even with items on, around here characters like Bowser, Mewtwo, and Pichu are the first ones dead. Sheik and friends still rip up whether it's 1-1 or 4 player melee items or no.
"I don't think Hyrule castle is an issue at all. In fact it is easily my favorite level."
No. When someone other than Peach can stay alive at 200%+ by going down in the trenches so the only good KO move is either a spike or a Smash at near 300% that's when I call it broken. And I don't think the banning of Termina in tournaments would need an explanation either.