I feel like you should ban all items. As for stages you could probably play pretty much whatever, so long as the two fighters agree on what stage to play on.
As for items, they spawn in random locations. this means who benefits from them is totally random. now the tournament isn't based on skill, it's based on luck. imagine you're in finals, and the guy you're fighting is at like 100%, but then he gets a pokeball, gets some OP ass pokemon which gimps you offstage to your death. you had the momentum before that, he wasn't able to get out of your combo, and some momentary stroke of luck lost you the game. it feels unfair.