Microsoft does publish on the DS, even their Rare and (previously) Bungie could release games on Nintendo handhelds if they want to. It's just Wii and PS2/3 stuff that won't see them.
Bungie have a history of this. They were once Mac-only developers (Marathon anyone?), then bought out by MS and Halo became a FPS shooter instead of that online shooter (or whatever it was). Now they're free again till someone else buys them out!
As far as I am aware, Bungie and Microsoft still have a close deal so that Halo titles only appear on Xbox and such. The separation does mean that Bungie can develop multi platform titles now. I'm guessing that Microsoft wanted them to just create Halo games, whereas Bungie probably wanted to start new projects and stuff. That's my guess anyway.
I don't think he's talking graphics here. It's obvious from the videos that they had the levels going well, but hom much could that little DS processor have left for AI?
It's been done decently before (Hunters), but that's about it. Still, it does FPS better than the Psp (Which sucks cause there could be some awesome FPS action on the Psp if there were a decent way to control it).
Hunters is possibly the best control scheme for a non-PC FPS. It's very precise and quick. Halo is a much slower game so you the superior DS controls wouldn't be required.
A 2nd analogue nub (or better still, analogue sticks) could be one of the shortest oversights in recent gaming years.
As for the DS AI, even Hunters had a good AI, the bots were a challenge. And what's the say the game would just be an online shooter? Seeing Bungie can't make a good single player these days.
Back in the day of 2D games I was in love witht he Metroid games. Still am. But I just cannot get into ANY of the FPS Metroid games! I'm not a HUGE Halo fan but I like that game a LOT more than Metroid Prime etc. And I can't put ym finger on why that is.
When I had Hunters on the DS I found that I could noly play it for about 15 minutes at a time as after that length of time my finger would really start aching. CAnnot rememebr how I was holding it but I always had one finger holding up the DS... Too heavy!