The lights are on
Nintendo sold a lot of DS systems and DS games with the Pokemon franchise-WHY didn't they make a Smash Bros. for DS and DS Lite?? They would have sold A LOT more systems! They even could have merely rereleased Smash Bros. N64 onto it for portable fighting happiness...
I think it just comes down to the screen - Smash Bros games have a lot of action happening often using up just a portion of the screen real estate, with lots of quick zooms and pans.
The game would have to be heavily redesigned to fit the environment of a smaller, lower-resolution screen, otherwise the result would be a complete visual mess.
Procesor cant handle the action of smash
There was a very similar game released only in Japan called Jump Super Stars/ Jump Ultimate Stars. Its easy to play without knowing Japanese and DS has no region encoding.
I'll go for two main reasons - processing power and online functionality
I own DS Lite and 3DS and it's noticable technological gap between those systems. It may not be obvious at the fist look but after spedning some time with 3DS and it's games it's easy to notice the amount of power in this little devil.
SSM was always focused on multiplayer (despite solid sp mode) and the old DS simply can't deal with all the streetpass, mii and dlc (my guess) functionality. Also online play on 3DS is better comparing to his older brother.