It reads like fan fiction and the rumor's original reporter—who uncovered PlayStation All-Stars six months before it was announced—concedes that nothing about it is confirmed. But Retro Studios is said to be working on, or at least to have considered, Star Fox-Metroid Fusion Saga, a mashup of third-person action gameplay with aerial/space combat.
Paul Gale Network revealed the first images of Sony's Smash Bros.-esque fighting game back in November, which has since been confirmed along the lines it was originally described. But in that story, the publication had a mobile phone picture of a screen at the time. Paul Gale Network concedes it has no secondary proof of this concept and admits this may have been discarded long ago, back when Retro was pitching ideas and Nintendo was looking to send the studio a new project.