Why/why not?

No its just Dynasty Warriors with Zelda characters.

Its a spinoff... So no..

It's a Musou game.  It's just a crappy Dynasty Warriors with another coat of paint. 

I consider it a proper entry in the Musou franchise.

no.

With this said, I would'nt mind if Lana appears in mainline games. Actually, I wouldn't mind a hyrule warriors 2 - the game is better than expected

As far as being part of the canon, it depends on what Aonuma says. Four Swords/Adventures feature distinctly different styles from most of the mainline titles, but were both incorporated into the timeline, so the style of gameplay really doesn't have any bearing. From what I've seen of Hyrule Warriors though, it looks to be an amalgation of existing universes over its own. I'm personally of the mind that it's about as canonical as Link's appearance in Soul Calibur II. It can fit into the existing universe, but you'll never see it mentioned in a mainline title. Essentially like a filler arc in manga-based anime.

Of course...the fanbase might disagree anyway, regardless of if Aonuma were to include HW in the timeline. Some fans only treat the console games as 'mainline', despite both Windwaker and A Link to the Past having sequels released on handheld systems.

I love musou type of games especially Sengoku Basara so 'm ok with it as long as they still release 2 traditional Zelda games per Gen along side the musou Zelda.

Depends! is the story canon? or is like tekken tag/smash brothers kind of filler?

No to the F*ing MAX!!

It's not even classified as The Legend of Zelda: Hyrule Warriors...It's just HYRULE WARRIORS!! They flip a switch on what the entire Zelda franchise is all about! Hacking and Slashing is just a portion of what you do in a true Zelda game, not the majority of it! Zelda is not even a Princess in the game, she's a QUEEN (A QUEEN of WTF pwning 1000+ mobs though)!

That being said, the game looks GORGEOUS!! It's GREAT Eye candy and the gameplay looks like mindless fun I will enjoy. Can't wait to pick it up.