First of all, you do NOT need your c-stick set to Smash. Item Boosting works just fine with Tilt Stick.
If you're throwing the banana downwards, that means you are doing it too fast. As in...you aren't running enough first before you input c-stick down.
It's different than a normal Boost Smash because all you need to start it is a dash attack, which can be started as soon as you start a dash, which is basically 1 frame after. With the Item Boost, since you have an item in your hand this time, the timing is different...and you have to wait slightly more. You can still do it from a standing position, you just have to know the timing.
If you want to perform it as fast as possible from the standing position, first try timing your item throw without worrying about the boosting. Basically, alter your timings between inputting your Dash and C-stick down.
If you are doing it too fast, Ike will throw the item downwards at his feet, still standing in the same position. If Ike does a dashing throw(Ike chucks the item forward, bending over slightly forwards), then you have the right timing. Work with the timing and find the right speed first.
NOW go and try the full Item Boost. Keep at it until you get it.
It ALL comes down to the timing.