There were probably a few issues at the time:

1. DKC: Tropical Freeze likely didn't sell as well on the Wii U as they wanted, so Nintendo may have been hot on the idea of an "adventure racer", but maybe had second thoughts about use Donkey Kong/Diddy Kong. 

2. Miyamoto was doing Star Fox Zero at the time and likely saw this as an opportunity to push Star Fox in another genre to expand its popularity. 

3. Retro I believe asked Nintendo to do a Star Fox game, but Miyamoto/Platinum already were probably doing Star Fox 0, so the discussion probably turned to "well we would like you to do an adventure Donkey Kong racer, but hey why not try it with Star Fox characters?".

4. Nintendo no longer owns the rights to several of the Diddy Kong Racing characters. But they own all the Star Fox characters. So I can see that idea if suggested picking up steam very quickly. 

I can see it happening fairly easily. To be honest I think this concept if done well will sell quite nicely for Nintendo and be well received by critics. That said, it's kind of a bummer for the F-Zero franchise as if this is successful, F-Zero probably isn't coming back. 

Krystal better be in it.

To be honest as a "story/adventure" racer Star Fox probably has more potential than Diddy Kong did. DK is not really gonna have much of a story, but the Star Fox games have always been story centric, so Retro probably has more license to be more creative with this than if it was Diddy Kong Racing. Space racer can be more wackier/out there sci-fi designs too.

Also uh ...

August - Yoshi
September - Fire Emblem Switch
October - Star Fox Grand Prix
November - Super Smash Bros. Switch
December - Pokemon Switch

Seems like that would fill out the release schedule pretty much post July.

Retro is probably one of most secretive team in industry, like that isnt enugh, team that works for Nintendo.

Star Fox Zero wasnt good game, that doent mean that next game want be good or that will perform same. F-Zero also was never strong IP.

Nothing tells us its cart game, and it sounds that game is quite big.

They will definitely have big online game for Switch online launch, so Smash Bros is most likly September release.

IMO something like this is most likly (offcourse Pokemon and Star Fox Grand Prix are not certain yet):

August - Yoshi
September - Super Smash Bros. Switch
October - Star Fox Grand Prix
November -  Pokemon Switch
December - Fire Emblem Switch

I don't think even if the leak turns out to be true, it is an indication that it will launch this year. It could...but the leak is not a confirmation of that. One of the people that seems to dabble a lot with Nintendo rumors, Stealth (not sure how credible he is), said that the game was being slated for summer 2019 but might have been pushed for release for the holidays (again not sure how credible he is, but just putting this out there).

Well, many thought the Mario + Rabbids rumor was too ridiculous to be true, as well.

If retro are going to make a futuristic racing game then why not f zero? Instead they want to turn a shooter into a racing game when nintendo already have a fast racing franchise established. It's a headscratcher if true.

If this is all true...
I really hope it isn't a reeking of F-Zero...
I think it would be cool to have a racing game set out in space...
Imagine having to make it navigate an asteroid field or survive an enemy fortress all while vying for first place...
Customizing your Arwing for improved handling or max speed...
There's definitely a cool concept there if this is true...
But as somebody who has been dying to see F-Zero return, I won't deny that I'm concerned...