KeyMaster45 said:
Legally the situation is black and white; Sega has every right to shutdown a fan project. That doesn't mean we have to agree with their decision; nor does it mean we can't view it in a negative light. Since by all outward appearances they let the game go through the full 8 years (maybe less) of development and shut it down only when it was released. If they didn't want them making it they should have shut them down long before now.
It's slightly more complex than that. A sad feature (and big flaw IMO) of copyright law is that if you are aware of something that violates your IP, you are OBLIGATED to shut it down, and if you don't you will be seen to have waived your right to enforce your IP and will lose claim to it in the future.
The smarter move though: Find great fan projects, and then convince the fan devs to come make it into an official project that they can release.
Also, why pick on Sega when other people are doing the same thing and yet still fanatically praised by fans. Star Fox 64 on the DS? An 'update' of Kirby Superstar where the only new level was a palatte swap?