It's basically gone, dude. The employees are looking for other jobs now...

There is no Kid Icarus, it doesn't exsist.

It is supposed "developers" are gone, poof.

That's a big part of it, but the more fatal blow was the fact that their last contract fell through, and they didn't have an alternative cash flow or cash reserves (that's where Lair comes in). The employees haven't seen a dime in months, and there are talks about liquidating. Not good.

Factor 5 are irrelevant to Kid Icarus. Nintendo will either give it to another studio to work on or do it themselves. KI is Nintendo's IP not Factor 5's. Even if F5 were purged in a great cleansing it would not matter.

You do know that Factor 5 developing Kid Icarus was just a rumor. No information was ever provided that they were. More than likely, After Lair their studio was already in trouble. That game was their only IP. There other projects were licensed games for Lucas Arts. I doubt Nintendo or any other developer would commit to letting a studio that is financially in trouble develop games for them. Remember Nintendo turned down an offer to purchase Rare because of their instability at the time. No, Kid Icarus is being handled by an internal team.

If they were developing a new Kid Icarus or StarFox game, Nintendo would definitely come to their rescue. If not, probably not.

I don't think F5 is developing Kid Icarus. It has only been a rumor that came from IGN but they have never shown nothing, no clips, no images....At least for me it has the same credibility than Sadness.
I really think Retro Studios may be behind this project since the begining, they could make a 'Retro' Kid Icarus just like they did with Metroid.

If Factor 5 or people from their company start a new 2nd party company for Nintendo or get absorbed by them than you know they are working on something.

If not than Factors 5 was never doing anything for Nintendo. In that case too bad. Kid Icarus or Starfox is being done internally at Nintendo or another 2nd party.

The just closed down a day or so ago.

Given that Factor 5 was intimately familiar with the inner workings of the GC and therefore Wii as well, it would make a lot of sense for Nintendo to use some of that mountain of money and bring them in as a second party.