It's easy to look at this in retrospect with current information and go "Oh, Ryu vs three Nintendo characters all killing each other, Ryu easily wins!", and you'd be right. Unfortunately, people didn't really think that way in 2007. Everyone looked at Bowser just absolutely embarrassing Ryu in 2005 and assumed this would be a cakewalk. Just look at the Oracle predictions for this and you'll see what Board 8 was thinking.