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It does seem like a strange assumption, that Nintendo backed down from user generated content without providing any evidence. It seemed like Nintendo was still pretty excited about UGC at E3 this year, at least on the DS. I also have hard time believing a 2.5 million selling game like Wii Music, caused Nintendo to be afraid of how games with user generated content would sell. Also if they were canceled because of Wii Music's sales, but were previously planned to release in 2009 that would mean the games were very far in development. So I just don't think Nintendo was ever that focused on UGC, but think that may be interested in it for the future.