Why he's on the list:
They call him the King for a reason. They also mock him mercilessly for a (big-bellied, spangled white jumpsuit) reason. Whether you think he's the progenitor of all rock music or just a racist Vegas sideshow attraction, Elvis's popularity can't be denied.
Depending on who's counting, Elvis has sold anywhere from 200 million to a billion records since 1954, making him the second best-selling artist of all time. (Number one on that list are the Beatles, who of course have a game of their own.) Elvis songs have appeared in karaoke games before, but none has ever graced a Guitar Hero or Rock Band tracklist.
Why he may not be in the games:
It might be the era in which he recorded his best-known music. It might be hard to track down master tapes from the 1950s, although you'd think if any tapes were kept in pristine condition it'd be Elvis's.
Also the rudimentary recording equipment of his time might complicate the process, although, again, Elvis was such a big deal that he got to work with multitrack recorders before almost any other artist. For whatever reason Elvis still hasn't even entered the damn building.