I think they killed it because they were planning on showing off their own remake

I think there are 3 rules to avoid getting the ninjas sent after you:

1) Don't try and make money 2) Don't do anything nintendo would realistically do 3) Don't touch mario. This one seems to be the most important. I see mario projects get killed all the time very early on in development, while am2r was allowed to exist until nintendo exercised rule number 2. I imagine the mother/earthbound fan works/translations will also be left alone if nintendo chooses to never touch that series again