Haven't had a chance to play Brawl until now, but I got around to it.
After a few matches, it happened. Four characters were fighting on a hacked stage. The slowdown seemed to occur when a Dragoon Piece appeared, which was hacked to be a Hydra piece. This was backed up because as I zoomed in and out with the camera, the glitchy lines seemed to be coming from the Hydra piece and connecting to it.
This is odd, however, since this same Hydra piece appeared in an earlier match (different characters and stage) with no ill effects.
Also, I made the mistake of trying to take a screenshot for y'all. It made a crash

Post Merge: October 20, 2012, 06:24:24 PM
There's never any pattern. It's a different set of circumstances every time.
Although I did play a bunch of matches with the items turned completely off, and it didn't happen. So it probably is an item-related problem...