As much as it seems to be a theme of Nintendo hate in this thread, they are very just - and in fact very lenient in their decision to pull it after it had been in the public domain for a considerable period.
The reason they didn't intervene prior? Probably because it would have been difficult to prove it was planned for distribution. After all, corporations can't put a cease and desist on a school notebook.
However leaving it "live" for the period they did, people that care for the most part would have seen it.
Fan made items can be very damaging to a franchise, with barely any chance to improve its standing as some may think - "guilty by association" is a phrase that springs to mind. If something is bad enough it can taint the opinion of the source material.
If you drew a self portrait, and then your friend (i.e. fan) drew a dick on its head - it would taint the source material (you). On the other hand, if he smoothed the edges people wouldn't think any higher of it - its still a self portrait.
Of course, I'm speaking in general, there will undoubtedly be people indifferent to fan made articles.
At the end of the day it depends on potential market saturation as to whether something will provoke a wagging finger. Fame can be your own worst enemy in this regard.