They actually did!! Ganondorf used his side smash (elbow) in the final battle!!
I find bowser (bad or not) really fun to play as in melee. All of his aerial attacks are pretty sweet, so long as you're good at L-canceling. It's always a close battle 1v1 when I'm playing as bowser. Albeit all my friends are pretty average at the game, so I can appreciate that he wouldn't be much of a contender in competitive play.
Anyway, I interpreted the same as you did concerning that bolded comment. I'd love to see bowser as a legitimate threat in the future! And he looks pretty sweet.
EDIT: Oh, and I'd love to see more villains in this game. Metaknight was a good start. Wario..... suuure but not what I'm thinking.