Personally, I think having Nintendo fund some game development by that studio, none of Nintendo's existing IPs really suit it. Instead, I'd suggest that they do something similar to what they did with Platinum Games, with expectation of a new IP, owned by Nintendo but with the understanding that Slightly Mad would be the developer of all future entries in the franchise.
Their skill is in realistic car-based racers - while I'm sure they would be adequate at making games around other modes of transport, and would be capable of going for the less realistic styles of Nintendo's current racer franchises, it's much better to go with their strengths, and have them work on a realistic car racing title. Note that this doesn't mean "just another Forza/GT" - it would need to have that Nintendo touch, of course.
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