Nintendo's announcement in late 2014 that using their intellectual property for derivative works is okay seems to be directed at PM specifically, given the timing. Just before, it was announced that PM would not be at the APEX 2015 tournament, and many people were blaming Nintendo for it.
Whoever was running the official Sonic the Hedgehog twitter account at the time expressed approval of this mod too.
Cowboy BeBop at His Computer: A rather prolific Zelda fansite named Zelda Dungeon attempted to do an article about how the Zelda characters have awesome final smashes in Project M... despite the fact that none of the clips in the video were from Project M itself and just random mods created by random users using the Project M source code. Not only are the final Smashes horrendously overpowered in the video, the very antithesis of what Project M is striving for, it also has custom characters such as Yosemite Sam and a pixelized Alice as characters in it.
Creator's Favorite: Had the team been able to complete work on it, the first of the new characters that would have been added to the roster would have been Knuckles the Echidna from the Sonic series. Apparently the team are big fans of Knuckles, despite many fans assuming Tails or Shadow would have been the more obvious choices. As far as the work the team was able to accomplish before scrapping the project, Knuckles was by the far the most complete of their new challengers.
Demand Overload: The 3.0 update release kept suffering server crashes due to not only impatient fans, but large amounts of passionately casualSuper Smash Bros. Brawl players attempting to purposely DDoS the release. Said server crashes interrupted and cancelled the upload multiple times. The initial download eventually had to be mirrored to file hosting site Mediafire so it could have a chance to be released at all until the initial hype relaxed enough to get the site stabilized.
Doing It for the Art: The team independently spent six years working on this project, all out of love for Smash. That's longer than the development times of Smash 64 and Melee! Then again, considering how massive of a project the original Melee was, the value of production was clearly much more intensive for the original game with many full-time employees working hard than for this mod a (comparatively) small group made as a hobby.
Exiled from Continuity: Hypothetical new characters for the game were strictly said to be based upon only pre-existing Stickers, Trophies, or characters from the previous game, and that they weren't going to be backporting characters from the Wii U and 3DS game, to avoid legal problems.
Fanwork Ban: Typing the words "Project M" in any post on the Miiverse network will trigger an automatic ban for discussing "criminal activity". Most people discussing it type it as "[the unnameable mod]" or something similar.
Fan Nickname: An unofficial name of the mod used primarily by the fans is "Project Melee". To clarify, the "M" doesn't actually stand for Melee. It's only a reference to "Melee".note The official Twitter and YouTube pages used to use the handle "Projectmelee" simply because "Project M" was taken, but they were changed because they proved to be too confusing.
A second unofficial name, is saying that the M stands for recovery, a light-hearted jab at how strong recoveries were in 3.0.
Keep Circulating the Tapes: With December 1, 2015, Project M disbanded and shut down the site, as well as the downloads page, leaving mirrors or a leaked developer build as the only option to get your hands on the mod.
No Export for You: Unfortunately, Brawl has significantly different programming for the NTSC and PAL versions, so even if it hadn't ceased development, Project M would have had to be made for NTSC before being ported to PAL.note However, it's possible to run the current PM with an NTSC Brawl ISO and a PAL Wii with the region lock disabled.
The Other Darrin: 3.6 featured the debut of a brand new announcer, so that the team wouldn't have to resort to Manipulative Editing for the character select screens. Eventually, he too was replaced after the negative reception to the new announcer.
Schedule Slip: The PMBR has had problems with getting the demos out to the public on time.
Demo 1.0 was initially released on the right day, but a huge number of download requests crashed the website server in twenty seconds, so nobody got it on time. The public had to wait for the demo to be re-uploaded on multiple servers/mirrors a few hours later.
The proposed bug/mechanic fix patch to Demo 1 was greatly delayed, and eventually became vaporware; see below for details.
Demo 2.0 went down this way as well; a mistake in development caused several problems (some specifically with Peach), so the demo was delayed for a day.
Demo 2.5 came out just a few hours after expectednote Some people's attempt to download the game early, before all the download mirrors were even ready, thus forcing the team to restart the uploading process, contributed to the delay..
3.5 wasn't even finished on the day it was to be released. In fact, the update was originally supposed to come out months prior; thankfully the public wasn't told this until it actually came out.
Screwed by the Lawyers: The team tried as hard as possible to avert this. They vowed only to include franchises that are already in the game (such as in stickers, trophies, etc.) as characters for the Clone Engine, for one example. Eventually, however, one of the reasons the mod's development was cancelled was to avoid harsher legal action due to its scale.
In the trailer announcing the 3.6 beta's release, there was one more surprise in the trailer... And it was that you could play as Warioman through a button press, teasing the people who wanted to see one of the rumored new characters officially announced.
Vaporware: Early followers of the project may recall the alleged "Demo Patch" note which probably would've been called Demo 1.1 or Demo1b, which was supposed to be a minor update for Demo 1.0 to fix some of the glitches and implement whatever mechanical improvements were available at the time, with a faint possibility of the inclusion of a few more characters. It was announced shortly after Demo 1.0's release. Not too long after it was announced, the team had many technical revelations and took the project to a much greater scale (more characters, more people involved, et cetera), thus decreasing the interest in making a simple patch. Instead, the patch idea was dropped in favor of making a full-blown Demo 2.0, which came out more than a year after Demo 1.
Demo 1.0 (14 charactersnote Mario, Link, Fox, Falco, Sheik, Jigglypuff, Snake, Sonic, Mr. Game and Watch, Zelda, Lucas, Captain Falcon, Ganondorf, and Marth.)
Demo 2.0 (29 charactersnote Peach, Pikachu, Donkey Kong, Luigi, Bowser, Ness, Wario, Dedede, Lucario, Toon Link, ROB, Pit, Wolf, Ike, and Charizard added. and updated mechanicsnote The landing detection fix is the big update.)
Demo 2.1 (the reskinning of Temple:M to be Skyloft, and updated mechanics.)
Demo 2.5 (33 charactersnote Ivysaur, Squirtle, Zero Suit Samus, and Diddy Kong added. and updated mechanicsnote Major improvements include the knockback stacking fix, the input lag fix, the edge-teching fix, the crew mode, the rage quit accelerator, and the stage select screen with striking capabilities.)
Demo 2.5b (updated mechanicsnote Major improvements include the ability to direct a player attempting to enter a pre-existing name tag to the same tag (basically, a name tag search bar) and better-functioning stage-striking. and several stage models directly imported from Melee, such as Final Destination.note Previously, the game used fan-made (yet mostly accurate) remakes of the stages.)
Demo 2.6 (Meta Knight added and updated mechanics.)
Demo 2.6b (Lylat Cruise and Pokemon Stadium 1 have switched places in the Stage Select screen, and updated mechanics.)
3.0 (Yoshi, Kirby, Ice Climbers, Olimar, Samus, Roy, and Mewtwo added, completing the Brawl roster and introducing two clone engine characters, alternate costumes, and updated mechanics.)
3.01 (A new launcher to replace Gecko OS that allows updates via the Internet and support for SD card greater than 2GB for Homebrew users. The Palette Swap bars on the character select screen were removed.)
3.02 (Falco's side-smash charge graphic was tweaked, a bug involving Lucario Hat Kirby was fixed, and the names on the character select screen were lowered to fit the gap left by the removal of the Palette Swap bars.
3.5 (Complete balance (with an emphasis on making safe recovery more challenging), engine, and aesthetic overhaul, Event Matches that were non-functional before were replaced with new ones that worked with the new engine and stages, and the Subspace Emissary was re-enabled.)
3.6 Beta (Many aesthetic changes such as a new announcer and Melee-style sound effects, the alternate stage function, some new stages, and moderate balance updates)
3.6 (Additional mechanical and aesthetic updates, including yet another announcer change, but mostly the same as the beta; final version as of the mod's closure)
Demos 2.0 and 2.1 had the announcer's "Failure" sound effect whenever a character is selected with a Wii Remote controller. It was removed because the PMBR felt the game reached a level of professionalism that made the easter egg undesirable.
Demo 3.0 and beyond features a few gems in the texture files such as stock icons for Pichu and a business card for Dr. Mario.
Holding the shield button while selecting Bowser or Wario allows Giga Bowser or Wario-Man (respectively) to be chosen as an independent fighter, and doing the same with the Ice Climbers puts only one of them on the field.
A patch for demo 1. The Back Room eventually lost interest and decided to make Demo 2 (which is implicitly much more expansive than a patch) instead.
Several character ideas were considered and tested, but not implemented in the public builds.
There was an experimental Fireball for Bowser, akin to such an attack from several of the Mario games, and slow and powerful, like Lucario's Aura Bomb. It was scrapped because it gave Bowser too much of an offensive edge (as opposed to his defensive tank-like style) and, as a result, took away the emphasis on the armor.
Wolf went through several moveset concepts, including a shine (reflector) that cancels upon landing, which is how Fox's shine works in Smash 64, as opposed to Fox's and Falco's current Melee-style jump-cancel shines.
Several alternate moveset concepts for Lucas as well, including a side-tilt in which Lucas does a stab/poke with his stick.
As seen in its reveal trailer, Ivysaur was introduced with a new animation for SolarBeam, which had it fire the beam from its mouth.note This animation was made because the animator felt Ivysaur already has enough moves involving its bulb, which is where the Bulbasaur family is normally depicted firing SolarBeam from. Since most fans responded that a bulb-firing would be more in-characternote (as is the case in several of the Pokémon games, the Pokémon animé, and even in regular Brawl, which has SolarBeam as Ivysaur's contribution to Pokémon Trainer's Final Smash), the new animation you see in the demo was made.
Diddy Kong had undergone similar issues with his hat flip being moved as his idle pose in one of the pre-2.5 streams, much to many DKC-fans' dismay. After much demand the hat flip was brought back with the clapping taunt being moved as the new idle pose.
Between Demo 2.1 and Demo 2.5, the PMBR tried a stomping A+B (the same kind of input as Lucario's supers) move for Wario. It's gone as of 2.5.
The Dr. Mario Alt Costume for Mario was originally going to have an AKIRA reference (a pill insignia on the back of Dr. Mario's coat). It was shot down by most of the team immediately.
PMDev considered giving Ganondorf a sword mode much like Samus's Ice mode, but found that the range it gave him either caused him to be overpowering and/or would require changes that would be far too big. Instead, only one sword move akin to the Warlock Blade from Smash 3DS/Wii U was kept as a taunt Easter Egg.
The head animator of the mod made a harp taunt for Sheik, presumably playing her Leitmotif from Ocarina of Time. As the mod was canceled, it will never be used.
Had the mod not been canceled, a redesigned Zero Suit Samus, an improved version of Roy's Fire Emblem Awakening costume, and a headband for Jigglypuff would've been included in the next update. There was also the matter of new playable characters planned for the game, of whom never saw the light of day except in a leaked video featuring Knuckles and Lyn, as well as a leaked developers build featuring both, and Isaac as well as Sami. Although a group of modders are working on making the four planned characters fully playable.