That was Iwata who spilled the beans, but I was fairly certain it was just in conceptual stages at the time as Sakurai was preoccupied with Kid Icarus: Uprising.
Edit: I don't know about reps. being upset about it, but Sakurai was pretty miffed at Iwata for tying him to a project he wasn't even asked to sign on with at the time.
Edit: I don't know about reps. being upset about it, but Sakurai was pretty miffed at Iwata for tying him to a project he wasn't even asked to sign on with at the time.