It takes 6-8 months to make a DLC character. They also have to charge for them. I'm not really sure that's honestly the best tribute.
I think a Balloon Fighter Mii Costume or some more Balloon Fight music (there's two cut Balloon Fight songs, one from Melee and one from Brawl they could add) are things they could do quickly and for free, rather than waiting almost a year for a character that will cost 4 dollars.
Not that I'm against the idea in spirit. I just think it's too big of a deal to really make work, versus other ideas that would have a similar tribute, but be substantially cheaper and faster to produce.
Not to say Balloon Fighter couldn't make it in on his own merits, either. Balloon Fighter absolutely deserves to be in Smash Bros. He already has a stage and everything.
Personally, if they want to honour Iwata in Smash, a trophy of him (using the Mii as the model) would feel better.
A trophy of his Mii would be nice.