I dont think Sonic will be in Smash Bros but its been confirmed that both him and Mario will star in a game being made for the 2008 olympics. The game will be published by Sega and has Shigeru Miyamoto supervising the project.
Sonic would surely thrash Mario in running races though perhaps the plumber will have other advantages. Other characters from both the Mario and Sonic games will also make an appearance including Luigi, Yoshi, Tails and Knuckles.
This game has to be worth getting just for Mario and Sonic both being onscreen together, its monumental.