Actually, Gen III introduced 135 new pokémon; technically speaking though, that generation was something of a soft reboot generation itself. 120 is actually average for the amount of new pokémon introduced, even after Gen VI, if you include Gen I in that count. Prior to Gen VI, the average was 130, and that average remains about the same if you count the Megas among the pokémon that were introduced in Gen VI.
I do agree that less new pokémon should be introduced overall, though. Not that large amounts of new pokémon would necessarily be the worst thing, but the issue with adding more and more pokémon is that it can become too much, in some ways. Older pokémon, particularly those who aren't noteable for one reason or another, are often lost in the crowd, and the size of the dex can be intimidating to new or returning players. This is why Megas were a good thing to introduce, Digimon-like trends or not. They let old, and in several cases, forgotten and overshadowed pokémon become prominent again, or even for the first time. That being said, considering the fact that fifty pokémon received mega evolutions this generation, I think that only introducing a small number like fifteen would be a mistake.
I must be the only person that loves when large amounts of pokemon are introduced at once, so I loved Gen V's roster. But I do agree that a lot of pokemon are being left in the dust as new ones creep up in every new generation. I think they have some options of fixing this, though.
1.
Introduce new and better moves and give them to older pokemon. Add older moves to older pokemon as well.
2.
New abilities. Replace some old ones or add a new ability slot (though I doubt they'd do this). Add some functionality to seemingly useless abilities. Like give Run Away the ability to escape trapping moves or something.
3.
More evolutions and pre-evolutions. Technically this would count as "new pokemon" but they'd be tied to the old ones. Branch and stone evolutions can always be a thing. Male Lopunny? Male Kangaskhan? Miltank and Tauros pre-evo? Farfetch'd evolution? The possibilities are plenty here.
4.
Change the BSTs. They've already shown us they can do this with a handful of pokemon getting hidden BST upgrades in Gen VI. With new pokemon growing more powerful each gen, the veterans are getting left behind and unused.
EDIT: 5. If they wanted to get
really bold, they could
change some older pokemon's designs slightly. We've seen art differences for some pokemon over the years, like how Pikachu has slimmed down to look cuter and more agile. But nothing seriously dramatic. Gender differences exist now, but for older pokemon, they aren't exactly life-changing, and some you even have to squint to see.
EDIT 2: 6.
Change some pokemon's typings. A type combination in addition to a good moveset, ability, BST, etc. can make or break a pokemon. Do we
need so many Normal/Flying types? Some have already been retyped to Fairy so it isn't like they can't suddenly decide to retcon some other ones.
Obviously I'm not opposed to having more than 100 new mons added, but the designs and abilities of each one can heavily determine whether they're worth it or not. Despite Gen III having a ton of new mons added, overall I wasn't feeling the designs as a whole. Some were cool, yes, but it wasn't enough for me.