1. What is happening here is, on a basic and technical level, illegal, however you want to slice it. This is the distribution of copyrighted content to which this site (I'm assuming) has no license to distribute. There is no time limit for older content that is no longer being sold.
2. Even more so, although Nintendo is no longer directly doing so, they still have a ton of titles up for Virtual Console, so the existence of the same titles here IS detrimental to their business.
3. I really doubt Nintendo is being selective; they are going after more popular sites that they can actually hit, and Nintendo of America dealing with an American site is far easier than going after many foreign ROM distributing sites.

I'd have been upset if Nintendo didn't have Virtual Console for many of their more popular retro games, but they do, and that's fact. As for the removal of hacks, they still have the original games as base, regardless, so they are entitled to remove those, too. Calm down and think this through logically, and you'll realize this is not one of the cases of big, bad Nintendo trampling over hopes and dreams (because they have shut down many a fantastic fan game in the past). This is a company looking to avoid a loss in sales due to a site illegally redistributing their content. And that's it.