Kratos will never be able to use the Master Sword.
Have these people ever played a Zelda game before?
The master sword can ONLY be used by the chosen hero (one that happens to be constantly reborn at that). Someone cannot take it and use it just because.
Also Time Travel would not affect Link because he has the Goddess of Time on his side. Link also controls time. Time has been a major element in a few Zelda titles. Jak's time freeze would not affect Link.
Donkey Kong cannot be affected by mind control. I would say the same could be assumed for Ganondorf as he is the one who normally controls others/possesses them. He has possessed Zelda before so the dance may affect her.
If Link and Donkey Kong take out Ratchet, there goes the mind control. The other characters regain their senses. Link can use either the magic armour or Nayru's Love as they both offer invincibility.
Young Link is also on the Melee roster, so technically speaking, there are two Links.
Mario has the invincibility star, fire power etc. Luigi mimics this.
Ness is powerful and can go head to head with some of Sony's finest. Jigglypuff can put the Sony characters to sleep. Fox and Falco have blasters, reflective shields, arwings etc.
Samus has her Varia Suit which is from an advanced alien civilization.
Kratos has a lot of darkness in him, hell he even practically killed his own family. Ganondorf could easily use him as a puppet. Kratos will go on to kill most of the Sony team.
Sonic would be able to swiftly take out many character due to his speed. Snake would be able to singlehandedly take out Nathan. Pacman would eat his pills and then go on an eating rampage to digest the opposition. Kirby can gain Kratos' power whilst he is possessed. Nintendo has essentially two Kratos on their team, two Link's that can control time, Ganondorf who has god-like power etc.
I just do not see how the Playstation All-Stars team can win this one.