Natives were absolutely enslaved by western conquerors regularly. It's not paraded much in the history books, but it happened.
In the US, Johan Sutter in California was known to have a huge native slave force. There's a special hook he developed they put through nose of natives connected to chains to keep them from running.
There is an Native American Rock Opera called Something Inside Is Broken that went on tour last couple years specifically about native slaves.
I'm part native, and was part of the Rock Opera last year. I also find nothing racist about the cowboys and Indians parody here. If you look at the cowboy, it's exactly the same design. And there's nothing racist I could say about his design either. It's a parody. Taking offense to this is quite simply an overreaction.
Someone might be offended it's about setting a fort on fire, but no more so than shooting ninjas out of trees or beating tattooed white guys to a pulp in the city street.
It's good to have your input on this. As a white guy with unverified 1/16th native ancestry, I may not be the best judge of this. But I don't see it as just two meaningless cartoons fighting.
I thought it was offensive as it lies in the combination of the stereotypical depiction (not just the feather in the band, but also including a stereotypical "chief" as a seeming 'boss' character
(click for link)) and being an enemy that makes the initial depiction problematic. That fighting these stereotypical "savages" as the "heroic", conquering Confederate soldier was good, and the goal of the game. To me, I find no way to reconcile this with not being offensive in a modern context- and Nintendo seems to have realized this earlier on, given the change of the natives to bandits in a later reissue. That said, in Smash, you're playing as the character who turns into the Native American sprite, so the game isn't playing as that Confederate soldier as the hero. But, then, he's still basically putting on a Native American costume for an attack to reference an old game that is problematic.
Like, to me, it's about as offensive as someone dressing up as an "Indian Chief" for Halloween. The game could still be referenced without the problematic asset with the bandit change... or just going back to normal G&W with a torch.
Does that make sense at all? Am I at all off base?