He seems to have quite a lot of weapon models attached and that might be why he lags the game so much if he is playing against himself. The anchor is cool but it does look kinda strange how it randomly pops into existence. Personally, that slaughter hook look too bad-ass not to be used more.
I would suggest maybe even removing the anchor and use only the hook?
You can give him some more range in his grabs to make him grab with either the hook or his freakishly long arm
When he double jumps he looks so out of place when he does that flip, maybe have him curl up completely into a ball when he flips, the might suit him a lot more.
He does seem to have a lot of knockback on some moves, like his F-smash, but as you said that was because he had a hard time connecting that. I'd rather have it easier to connect but weaker.
His recovery move is great! Don't change it ^^
If you made his N-special (the long arm) into his F-smash, you could potentially give him a bowser like F-special, a grab move (ganong also has one) , where he throws out his hook, pulls his opponent in and gives him a fierce uppercut with his big arm.
You could also give him air grabs like ganon has, using his hook to hook into opponents and throwing them down if he connects.
(that hook has so much potential!)
Is his f-air a tire iron? Can't quite make out what it is. My suggestion here would be to make him use his big hand as a hammer instead, or the hook. Because it's awesome X3
His self harming exploding move is interesting! I like it, but I am wondering if that is super armor, or if it is % based armor. Like if an opponent does under 10% damage in one strike he won't flinch, but if he does 12% he will flinch. That way he won't be able to spam. Although spamming that move would be pretty dumb either way since it's self harming
He should have a 3 hit jab combo I think. Something like him striking with little arm, then a bodyblow with his big arm, and then a downwards hammerblow again with his big arm.
his up special on ground, where he throws those smoky orbs up is so cool, and even though it's quite powerful I don't see a reason to change it since it's so hard to connect with. Attacking this guy from right above isn't a good idea.
His front special, (the jumping move) is very, very OP. It also looks kinda strange that he doesn't extend his legs when he jumps. I would suggest that he has move overal body movement and maybe if he connects in air, grabs his opponent and drives them down to the ground.
Either way, damage and knockback should be maybe halved for this move.
This nightmare-fuel guy looks great and creepy, I wanna see more of him!