With due respect to the OP, a Smash RPG should happen before a Smash and Dynasty Warriors crossover. I would love to enjoy choosing my favorite characters beat the tar out of bad guys, but the issue lies in with how to make the game contain high replay ability without making the game tedious. Said issue has been a problem for much of the Dynasty Warriors games (for me, 8 ended this).
With an RPG, the huge pool of characters throws a plethora of ideas into the mix. If anything, Sakurai and Monolith Soft could take a Smash RPG and pick up where Subspace ended in Brawl. That could make for a great game. Not only that, since each character has a finite set of skills, character types won't he that difficult to figure out.
Again, to the OP, the idea posted is rock solid. The issue mainly lies within replay ability for the game itself. Should there be a solution towards maintaining replay ability, I say go for it! 
" It has never been about acknowledgement when you achieve something. When you are acknowledged, then and only then can you achieve something. Always have your friends first to achieve your goals later." - OnlyForDisplay
