Ah, the bane of my Falco existence. I based my Falco around this match up for a long long time, so I'm really good at it, all though lately I've been getting a bit roughed up, I feel I can speak on it pretty well.
Toon Link is a campy character, most of the time, if he can't beat you, he'll try to time you out. Needless to say, this can be an annoying match up, you have to campy characters doing what they do best.
That being said, How we should be camping:
We all know Falco's Horizontal camp is beast, so we abuse it, that's standard procedure. SHDL is (I think) more efficient in this match up than any other. TL will be jumping a lot to approach and lasers do quite well to stop him. SHL while he's on the ground though, don't let him find openings cause he can run at us quickly.
Our lasers stop his bombs and boomerangs which could be a big problem if not handled properly. His arrows I try to reflect, but one big problem I have is I spam reflector to much, only use this when you're sure he's bound to get hit by one of his own items.
On that note: Reflector, bombs and arrows, smart TL's will never throw straight boomerangs at you, angled boomerangs get deflected away and they run no risk, so this is a mind game. I do well against bombs, when they throw them up close. Arrows I reflect when I'm at the other side of the stage, although it can be done close up. The reflector is a very powerful tool but it depends more on your opponent's style than the match up itself.
Reflector doesn't work against Z-air though, and that is to me the most important aspect of dealing with a Toon Link. Zair is what always gets me, it's a quick move, it does decent damage and it sets up some stuff if we get caught by surprise. Shield it, or dodge it, but be very smart about it. Learning to deal with a TL's zair is gold, can change the match entirely. I powershield it all the time, but try to not follow up right after, since a second Zair could be likely so powershielding a second time is also likely. Remember TL's can Zair with a bomb in hand and use this for follow up, relfector can be a nice keep away option out of Zair, but be careful about spacing, good TL's will be out of jab, and F-tilt range.
Don't blindlessly rush after a Zair, nair can be used almost instantly and most Toon Link's I play against usually build it up as a reflex.
As a mentioned earlier, Toon Link's camp game is pretty sweet. However, it has both an advantage and disadvantage against us. Our horizontal camp is greater, but his vertical and diagonal camp hold a clear advantage. Always try to stay directly in front of the direction toon link is facing during the camp game, and don't let him get above you. If he does, be smart about how you'll chase him back into the ground. His Dair is a laggy move, but fast to hit and kill us. I personally wait for him to fall down and approach from the side with bair. Learning to catch his bombs helps when he's above, and simply running out from under them can make him come down when he notices the camp isn't working.
Once your both on the ground, ground combat is a little easier. As always, your jab is godly. It's faster than all of toon link's attacks and it's range is wider. Ftilt is great work for spacing when you want to go back to camping.
Our grab is faster and we can read his and spot dodge for free damage.
Toon Link can be easily chained grab and for max damage we need to walk grab. However the timing is a bit weird, so dash grabbing works just as well.
Beware his bair near the ground, it can combo up to 7 or 8 times if done correctly so this is probably the most dangerous move in his arsenal.
Also beware pivot grabs.
Upsmash will be his main kill move, though it is very easy to read. Side smash can be DI'd out (someone please post the direction xD).
Uptilt can lock us but it can also be DI'd out of (need direction for this too)
On a very general note, learn to powershield it could be the difference between winning and loosing.
Stages:
Vlade once told me YI's is best, and I'm gonna trust him on it cause he's good at edge guarding Toon Link, something I can't seem to do.
I'll take a toon link to any stage though, but the longer the better. PS1 is good for me, but you can't let him take the advantage to early on out. FD of course, SV is a bit harder to mess around with and you have to be slightly more careful. I personally like battlefield, but you gotta handle platforms well.
As far as banning, Toon Link's will probably take us to Lylat but I have never seen a problem with this. They will throw bombs from the air, we can catch and throw back. I have a bigger problem with Brinstar, but I guess it all depends on what stage your least comfortable playing in. Ban that one.