(To clarify... back around the release of TWW, online Zelda communities were active with many timelines and theories. I was a big figure on the forum I frequented, but the idea of a Zelda timeline can be traced back to the original Zelda Headquarters site)
Now, on the subject of a FPS Zelda. I think FPS is the wrong term. What Miyamoto seems to describe enjoying (despite calling it a first-person shooter) is a first-person adventure (or FPA) much like the Metroid Prime series. The basic idea of a first-person game. Not necessarily the shooting.
"I've always been into first person shooter (FPS) style games, 3D games in which you can walk around freely and see things from your own point of view.
I think it is more comfortable, more natural. We are creatures of habit. We don't look at our feet when we're walking around, and we're always trying desperately to take in the scenery while we're living our lives. So, even in these games I want people to be able to get really into the 3D geography, so it feels like you're really there, since I think it's a really natural thing to be able to look around while you're walking. At first when we were developing The Legend of Zelda: Ocarina of Time, I even proposed using a first-person perspective.
I thought that the FPS system would be the best way of enabling players to take in the vast terrain of the Hyrule Field. Besides, by not having the player's character on the screen, we can spend more time and machine power on creating enemies and the environments.
Well, although I had originally planned to make a game with a first-person perspective, the idea of having a child Link in the game was born, and then it became necessary for the hero to be seen on the screen.
So, we decided to have the hero visible in Ocarina of Time, but I had always thought that FPS games which you could operate from your own perspective were really interesting, so I was proactively supporting such projects like the GoldenEye 007 game."
And on Link's Crossbow Training...
"We argued that it would've been kind of strange for us to give Link a gun, so I proposed a sort of Terminator style story about a time warp from the future, but they [the development team] vetoed that idea immediately. You remember the Hidden Village in Twilight Princess? Well, I personally love that spaghetti western-like setting, and we re-created the scene because we wanted people to be able to find joy in FPS games. I also thought that if you were able to use the Wii Zapper with it, it would be even more fun. So we finally decided to give Link a crossbow, but the problem then became what to do about rapid-fire capabilities. Shooting a gun in machine gun style rapid-fire is really satisfying, but having a crossbow that was able to shoot rapid-fire seemed a little unrealistic. But in the end we kind of decided, well, it's really just for fun, so whatever, and we gave it rapid-fire capabilities.
Well, shall we develop the next Zelda game with Link holding a Wii Zapper, and not a sword? It would be easier for us developers as we do not have to let Link change weapons all the time."
That last bit was said in jest as he then added "Well, that could be a problem, couldn't it?" while continuing to laugh.
First-person games aren't too popular in Japan and that was the main reason behind Link's Crossbow Training. Miyamoto wanted to show them that FPS is fun.