Oh yeah, well.. If Nintendo tried to sue PM devs then all they'd have to do is mention MUGEN and the whole world collapses unto itself before the PM devs would ever end up getting sued.
Just speculation here. If Nintendo knew about PM this whole time, but didn't say anything, and now a new company comes by and says "We want our guy in your game, but we're not certain how well you defend your IP *points at PM*" Nintendo is put in a very bad position. This is just one of many scenarios being passed around as possibilities. I have no proof this is the actual scenario.
MUGEN isn't a mod of a game made by Nintendo. It's its own thing entirely with custom fan made fighters. MUGEN itself is nothing more than a platform for players to play custom fighters on. It's not the same as PM where it's using all of Nintendo's work, with some custom and some modifications, to make a functioning game. Comparing the two isn't really fair.
-[edit]- I mentioned that scenario specifically because it's something that happens semi-regularly, if not in the exact same flavor. Something similar happened with Mojang and Scrolls. Bethesda was all "Dude, we really don't want to, but we're legally required to press charges about the name Scrolls because it's too close to 'The Elder Scrolls' and if we want to defend our IP later down the line, we have to defend it now or we lose the rights to later."