Some things that may be important to understanding the situation with AM2R:
1. Someone at Nintendo issued a DMCA against the download's host sites and parts of the AM2R blog where the file was distributed from, but the AM2R team has /not/ received an actual Cease and Desist notice. They are, in fact, still working on the project because they haven't been told not to.
2. DMCA is probably entirely the wrong legal framework for pursuing this since AM2R does not actually use any protected material. No code or assets from the original Metroid 2, nor from any other Nintendo property, are involved in the work, so no /copyright/ violation is in play. The DMCA notice states that AM2R infringes content from every entry in the series (including the /Prime/ games of all things), which is patently absurd (again, it infringes none of them as far as /copyright/ is concerned).
There is a trademark issue, to be sure, but that brings us to our next point.
3. The AM2R project has been public for eight years, and has previously released working demos of AM2R, and in that time Nintendo made no action against them. This makes things pretty murky as far as protecting one's trademarks, especially since AM2R has never made the claim that the Metroid IP is /theirs/ (essentially, by properly referencing Nintendo, the AM2R team has protected the trademark for them)…so there's very little concern of brand dilution/genericization.
Really, AM2R is something akin to a song cover, which can be handled under mechanical licensing. A lot depends on how the conversation goes between Nintendo and AM2R once someone at Nintendo with actual authority on the matter gets in the loop, but hopefully someone will manage to set some better precedent before this is over.
Right now, all most of us can do is wait and see how things shake down.