Taking another guest from the same franchise for the same game doesn’t seem like the best idea.
Agreed 500,000%. Haohmaru was already a dubious choice on many levels, and though he has been embraced a bit more warmly than was expected, with a consensus that he's distinct enough to justify the add, we definitely do not need yet another Miyamoto Musashi/'samurai determined to challenge himself against the best' trope in this game. And regardless, once Setsuka is added, I'd say another Japanese character of any sort is highly unlikely, which discounts most of SamSho's cast and all of the more likely transplants after Haohmaru
Eh, it was the incompleteness of the product that bothered me more than the content, and I’ll keep that as my foremost complaint above everything else. What we did get was pretty refreshingly different.
Yeah, I don't think the story was the problem with SCV--and to the extent you can point out faults with it, I don't think 'fanfiction' is the right description: fanfiction would tend to focus on established characters but simply place them in poorly conceptualized and executed situations, or portray them in a fashion that is otherwise ham-fisted and/or inconsistent with previous canon works. In SCV the problem is almost the opposite: a time jump that saw most of the regular cast sidelined to make room for shiny tween versions of themselves.
Beyond that, I don't know how you make fanfiction out of SoulCalibur's silly plot when most of it is already written at that amateurish level with very low stakes plot points, rebounding immortal characters with limitless plot armor, and just so much hokiness, pop-fantasy trope-ification, and all around goofiness. If anything, SCV tried to remedy these problems a little by focusing on the stories of a more limited subset of the characters, introducing permanent death for main characters for the first time in the franchise's narrative, and offering some sort of stakes and a sense of resolution to the series' otherwise rinse-and-repeat plot threads. Where Daishi crashed things was in basic game mechanics and aesthetics. And of course, as noted above, the over-all incompleteness of the game--but you have to lay the blame for that on Namco for it's lack of support for that entry, not the work of the developers.
I liked the Soul Calibur being the villain angle...
I'm kind of mixed on that. I'm pretty over the "evil is evil, but good is also evil!" cliche in fantasy storytelling. To make it work, you really need some nuance in your writing, which of course is not something one can reasonably say is a strong suit of this series. But on the other hand, I would argue that there is actually a pretty healthy set-up for this theme that V's writers cleverly leveraged here: I mean, look at what has already happened to the Alexandria clan, prior to the opening to SCV (although, admittedly, some of it is only imparted in SCV itself):
For her heroics in the first couple of games, Sophitia is cursed in a manner that not only threatens to end her own life or corrupt her with malfestation, she also has to live in constant fear for her children, a fear that ultimately sees her forced down a dark path, with absolutely no apparent rescue being attempted by Soulcalibur/the gods who sent her on her quest in the first place. Ultimately she dies in that vain quest to protect her children, who are then separated and then groomed/manipulated by monsters into becoming malignant forces themselves and set on a collusion course with one-another. Then Sophitia's image (and maybe a portion of her essence?) are appropriated to manipulate them further. Meanwhile, her sister, who from an early age takes it upon herself to try to help Sophitia weather this shitstorm, is ultimately forced to challenge her, fails to stop her, and ends up cast out into a void between worlds, where she wanders outside of the normal flow of time and space for who knows how long before she stumbles into a fate where she is bouncing between realities as her mind slowly cracks.
And all of this because of Sophitia's original (as it turns out dubious) decision to answer the call of her supposedly benevolent gods. That's one of the reasons (along with the higher production values and general sense of the plot actually going somewhere and not just setting the next game up for auto-repeat of the same basic plot) that I actually think SCV's story, while surely not narrative gold, is actually struggling towards something we could at least call alright: the good guys actually finally accomplish something that isn't just hitting the reset button. And it's not because of one sword or the other temporarily triumphing, but because the people involved decide to stop playing the game. In a way, it kind of establishes Edge Master as the hero of the saga, because he's the one who engineers the solution that sees both swords banished to the Astral Chaos in an ending that thematically seems to suggest is actually permanent this time. So, generic and goofy as the "too much 'good' is just as bad as too much 'evil' is" plotline may be, it actually ends up feeling much more earned and satisfactory than any other ending in the franchise's over-arching plot.