The project was ongoing until it was shown to the Nintendo board of directors, who rejected it. "You have to remember Nintendo is a very conservative company," the anonymous developer told Pocket Gamer. "It always has various R&D projects on the go, but most of them are eventually rejected. It's just how it operates." Conservative, maybe, but to even consider supplementing or supplanting the Game Boy line with a cell phone back then is a bit out there. Consider Sony Ericsson, who are reportedly working on a PlayStation phone this year.
In any case, if the research went on to inform Nokia's development of the N-Gage, it would seem Nintendo made the right call in just making the DS instead.