This parts actually not entirely true. Nintendo had very little interest in Rare at that point since they were having issues adapting their studio management for the new consoles. Rare was really combative and Rare really liked having a bunch of small teams all doing different projects, and that wasn't really going to work as well with new hardware and graphical standards. They were very stubborn about it too, for example Perfect Dark Zero was made by a team of like 14 people at Rare. This is also why they had alot of projects that never got off the ground from around 2001-2007. That and the Stamper Brothers leaving.
@Vyse Inglebard I think it might have been a different guy than Gamehut