I tried just using only characters from games that were either developed or published by Sony.  This would thus keep the cost of game down due to licensing issues. who knows when a supposedly loyal developer will have a fall out or stop being loyal to your system.

can the OP edit the 1st post and keep updating the list so we have 1 complete list.

ot:

yakuza dude
sev, rico and radec
a chimra
time crisis dude
someone or something from siren
white knight from wkc
ape from ape escape
dark cloud 2 dude
mark of kri character

theres lots but none of them stands out. except for da sackdude

Sony just got a Smash Bros. game... without the Sony characters, however.

Rag Doll Kung Fu: Fists of Plastic has a setup very similar to Smash Bros.

I guess it would be most of their first party stuff and a few 3rd party games.. I'm gonna make a list of 15 and try to use mainly first parties that i'd like.

1) Dart [Legend of Dragoon]
2) Kratos [God of War Series]
3) Jak (3 different appearances like Link in Brawl) [Jak series]
4) Rose [Legend of Dragoon]
5) Sly Cooper [Sly series]
6) Drake [Uncharted series]
7) Cole [inFamous]
8) Spike [Ape Escape]
9) Ratchet [Ratchet and Clank]
10) Jeniffer Tate [Primal]
11) Keats [Folklore]
12) Ellen [Folklore]
13) Sir Daniel Fortesque [MediEvil]
14) Jeanne [Jeanne d'Arc]
15) Arc [Arc the Lad]

SONY definatly has enough characters to do something like this, I just chose an easy fifteen and I think all of these guys/girls can work well. There's also the option of throwing in special creature like characters or smaller fighter if that's what you wanna call them [pikachu, Jigglypuff, kirby] like these guys:

1) Monkey [Ape Escape]
2) Sackboy/girl [LittleBigPlanet]
3) Echochrome Doll [Echochrome]
4) Daxter [Jak and Daxter]
5) Clank [Ratchet and Clank]
6) The locoroco.. blob thingy... [LocoRoco]
7) The patapon Warriors... Sorta like the Ice Climbers :S [Patapon]
8) A Lemming [Lemmings]

I could see something like this working out really well.

Kratos

Zeus

Aries

Sackboy

Sackgirl

Ratchet

Clank

Jak

Daxter

Crash

Nathan Hale

Nathan Drake

Cole

Alundra

Arc the Lad

Minamoto Yoshitsune

Nariko

Kai

Rau Utu

Sir Daniel Fortesque

Wander

Ico

Sly

Lenard

They can add in more baddies also. 25 or so is a good number to start off with. They can add quark and other people from games etc etc.

you forgot a car or two from gran turismo

12) Sackboy

13) Sly Cooper

14) Sephiroth

15) A car! lol.

16) Nathan Drake

17) Nathan Hale

18) Cole McGrath (inFamous)

19) Sev (Killzone 2)

20) Nariko

21) Wander (Shadow of the Colossus)

22) Solid Snake

23) Ocelot

24) Big Boss

25) Raiden

26) Dante

27) Nero

28) Ico

29) Jin Kazama

30) Rayman! I miss him