Wouldn't you be using Pokemon sprites, names, and some other graphics? Technically the game wouldn't be 100% scratch then. So I'm sure nintendo could shut it down if they really wanted to. So I don't think Cyclone is right.
And as far as the computer being limited... I'm sure you could do plenty of different things... I don't think the computer is really limited at all, as it is just not as portable (is that kind of what you meant?)
I love the idea of it being put onto a DS, it sounds really awesome, and I'd love to see it happen! I hope you can get that figured out, and maybe release a small demo of the first town just to show it working when you get that far :)