The game should be a Power Stone clone developed by Sony's Japan Studio. Knack may not be a great game (or even a good one, for that matter), but I think it'd be a decent foundation for the kind of gameplay a new SonySmash should have. If they touched up the combat, added loads of goofy weapons from Playstation games, and had shifting level design like Power Stone 2 (with none of the IP mixing the first game's levels had, since it made the levels feel messy and disjointed), it'd probably be a pretty damn fun game. An actual story mode wouldn't hurt, either.
As for the roster, it should be this fucking bonkers who's who lineup of names you associate with Playstation. There needs to be numerous "holy shit I can't believe they went with that guy" picks, as well as the absolute fucking no-brainers missing from the first game (Crash, Spyro, Cloud Strife, Solid Snake, etc.). In the case of Crash and Spyro, make sure they're in their original PSX designs. It doesn't matter if they have to pay Activision, Square, or whoever owns the licenses now, you cannot have a credible "Playstation All-Stars" game without Crash and Spyro at the very least.
The big, current IP characters (including guys from the first game) are important and would no doubt also be in the game, but there needs to be a lot of deep cuts from old/obscure Sony IPs. These guys in particular come to mind:
Robbit from Jumping Flash
Mister Mosquito (Yep, it's actually a Sony IP)
Blasto (Billy West has to be looking for work, right?)
Tomba
Gabe Logan from Syphon Filter (even if it's only so he can beef with Snake in the story)
Ultra V from War of the Monsters
Pomeranian from Tokyo Jungle
Vibri from Vib-Ribbon
Third-party might be a little more difficult to make happen, but it's important. Third-party put Playstation on the map, and there's too many IPs that are almost exclusively associated with Playstation for them not to make a proper stab at it. Ideal third-party gets for me would be:
Lara Croft (The original incarnation)
Gex
Klonoa
Jill Valentine from Resident Evil
Abe from Oddworld
Mega Man X
Subaru Impreza Rally Edition from Gran Turismo (Rally Edition because he fights dirty)
Alucard from Symphony of the Night
Pyramid Head from Silent Hill 2
Reiko Nagase from Ridge Racer
Tony Hawk, Pro Skater
Any IP that doesn't make the roster could still be candidates for weapons, stages, boss fights, etc. There's loads of potential to get stuff in.
There's probably a bunch of good ones I'm missing, but tell me that some of those characters wouldn't make you lose your shit.