I'd like to step out of the shadows and make a few suggestions !
-Toriningen (Yume Nikki): Runs in one direction until she falls off of the stage. Hits several times for light damage if you're run over by her.
-Star (Hoshi Saga): Activates when picked up. Turns the user almost totally invisible (maybe a shimmer or some sort of refraction could denote where you really are), and also removes that player's marker (IE P1, P2..) from enemy view. This would only really be feasible in online play, if that's incorporated. Lasts 8-10 seconds?
-Strange Musical Note (Eversion): It's the only graphic I could think of. Activates when picked up. Stage music/color dulls, more unsettling music plays quietly. All buff/health items are reduced in effectiveness. All damage dealt by players is increased slightly. Lasts
seconds. Could be stacked?
-Sumo Wrestler (Sumotori Dreams): Slowly walks around the stage for a while. Falls over if hit. If he falls on top of a player, they receive heavy damage with no knockback. Dissapears either after falling twice or being ignored for a certain amount of time.
-Cancer (Mondo Medicals): Small , nondescript rectangular monitor buzzing with static. Thrown item. Reverses the controls/significantly lowers the speed of the recipient.
That's all I've got at the moment.
I like Pigbuster's Uboa idea, too, I'd love to see him implemented.
And both Shmup ideas sound great, Shade. If the stage were to be put it, not all of the ships could attack in the course of one match, I don't think -- maybe a good portion of them could be flying through the background?