Lines of succession among the Eldar and other races ran to male heirs by way of male descent. Daughters were not heirs, and neither was a son of a sister or a daughter.

We know this was the law among the Noldor: when Turgon died the High Kingship passed to his fairly distant nephew Rodnor Gil-galad (son of Arothir Orodreth) rather than to his grandson Earendil. The latter was not of male descent.

We know that this same law applied on Numenor (before they changed it). That is explicitly stated in Unfinshed Tales.

The same law seems to have applied among the Dwarves. Dain Ironfoot seems always to have been Thorin Oakenshield's heir. There is no suggestion that Fili (the elder of Thorin's sister-sons) was ever considered to be his heir. Indeed, in The Hobbit Thorin introduced Fili and Kili as "sons of my father's daughter," a circumlocutous introduction to say the least. He seems to emphasizing clear that they were only his nephews, not his heirs.

It is my view that Dior was not Thingol's legal heir. I tend to agree with MM that Dior's refounding of Doriath was his own decision.

However the law may have allowed for sister-sons or daughter-sons to become heirs if there were no heirs of male descent. We know that happened among the Rohirrim twice, and also among the Stewards of Gondor. But they are Third Age instances, a long way removed from the Elder Days.

If we accept what I call "Celeborn and Galadriel Scenario C" (CGC). That is, the scenario presented in LOTR Appendix A and in The Silmarillion. In which Celeborn is said to be a prince of the Sindar of Doriath (specifically a grandson of Elmo, a brother of Elwe Thingol). Then Celeborn may well have been Thingol's legal heir. But if so, why is that fact never mentioned? Another reason to reject CGC perhaps?