Take from it what you will, but imho, him talking about magnitude enlightens, as you said, that he was talking about content quantity.
The discussion regarding where to take the series in terms of balance wasn’t even mentioned. Nintendo throwing in the towel also wasn’t mentioned. Neither was the idea that there aren’t other possible characters that could be added. All that was discussed is that another entry with a similar increase in magnitude is unlikely according to the lead game designer.
From where I’m sitting, you jumped to conclusions over a misquote, and then after you recognized the actual quote was most likely about another similar jump in content quantity, you doubled down on making assumptions.
Maybe Smash does need to refocus on their competitive audience, maybe not. But that has nothing to do with the interview in question.