Shadows of Lylat's been in development for a while. Technically, the game engine is built off of the one from Freespace 2, so it's not exactly original. I'm a bit worried about this one, since it looks like it might not have corridor gameplay, which would seem odd in a Star Fox game (just like it did it Command, for the most part).
Nintendo has had years to take this one down, but they haven't done it yet. Considering it's one of the more well known fan projects when it comes to Star Fox, I'd be surprised if Nintendo didn't hear about it already. I guess we'll see.
As for why does Nintendo not make their own Star Fox... who the heck knows. More concentrated on making games that are sure to sell (ie. Mario and Zelda, all those Casual games too) rather than Star Fox, which is probably wouldn't sell as much.