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The whole situation is BS and a rumor from Matt (who probably should be disciplined for such).

Think about it. The game was only said by IGN and they claimed it would be at E3. If artwork for the game made it's way onto the internet, it would have tried to be covered up. It wasn't. Also, this would be a core title (or a "hardcore" one). Why now release another Kid Icarus? E3 08 was also Nintendo reaching out to the expanded audience. The core games of E3 were not mentioned in the press conference, but were still on the show floor. It just doesn't smell right.

Truthfully, I doubt Nintendo will buy Factor 5. They don't share the "DNA." They are conservative, so I doubt Nintendo will bail them out.