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I keep hearing that it has to do with a Nazi/Hitler fight at the end of the game. If Capcom doesn't want to edit it, then Nintendo wouldn't allow the 'original game' to be availabe.

I'd say that is it, especially since stuff like Snake in Brawl, and XBLA versions of Sonic games available on the VC, debunk most of the assumptions about promoting blah blah blah.