They generally reject any 'request' to make a fan game, no exceptions. I look at it like this, though. The only fan games that I've seen get cease and desists are those self proclaimed 'big MMOs' which the creator tends to parade around a good number of sites. If you kind of lay low with your game, and generally keep it around sites like PC and deviantArt, you'll be fine.
Nintendo is pretty much obligated to reject requests to make fan games; those fan games use trademarks (and often copyrighted materials), and if the issue were ever brought up in court, it might set a precedent as far as Nintendo is concerned, allowing for more infringement of those trademarks. Also, it's just bad company policy to let just anyone make derivative works of your games that are branded as your games, you know?
They will not, however, actively look for these fangames to take down, only pursuing a case when it becomes enough of a threat to their business practices (such as those big MMOs). They don't have
that much time and money to waste.
In general, fangames, including the ones that "lay low", don't get completed often. As soon as a fangame actually gets completed, expect it to get spread around more, and expect a significant risk of it catching Nintendo's eye and them subsequently cracking down on it.
As it is a Pokémon fangame and not just a "Pokémon-style game" with all-originally-created content, there is no chance that you could simply debrand everything either, like I eventually did with Four Star Mon (went from being an open-source "Pokémon" game engine to a "Pokémon-like" game engine to a "monster RPG" game engine as the project got more and more generic and all-encompassing). So if you do ever get a C&D down the road, take your game down from everywhere (cease), and never put it back up again (desist). You can't really do much else because if you get brought to court, you're pretty much guaranteed to lose.
Still, as Daedalus said, if you can manage to keep the spread of your game down, even when it is completed, you should be okay, but only because Nintendo wouldn't actually go after you in the first place.
Obviously, those are just my thoughts and shouldn't be taken for a fact. The legality of fan games could be debated all day with no real factual resolve. Just make you game and don't worry about it. :)
If you're making a fangame, you're generally at the complete mercy of whoever's "intellectual property" you're copying. So while they're not inherently legal or illegal, the "owner" of the "intellectual property" is the person who determines whether it is or not, as well as who is allowed to and who isn't.
But take my advice with your own grain of salt too; I'm not a lawyer either, and because of that, this should not constitute independent legal advice.