I'm sure it was discontinued and never spoken of again because it was a good idea
Also I don't see what Nintendo gains from it. They could do a separate optional thing like Home for Sony, which actually makes Sony profit, but I don't see why they would. Seems....pointless.
Animal Crossing would lend itself to the idea perfectly. Just replace the animals with Miis and you are pretty much done. Everyone's log in logs into their own personal town, and then you are able to connect with your friends (on and off line) by visiting their town.
Visiting different buildings represent different parts of the OS, such as the eShop, Internet Cafe, etc etc.
Playing games and doing "accomplishments" earns you gear that you can use in your town, so now everyone's town can be unique through the games that they actually play (not just own).
Of course, this would all be an optional interface and you could opt to use the standard system of menus if you like, but the AnimalXing interface could be a nice distraction and a way to get you to play you to play as many games as possible.
edit: looks like I was beaten, but I elaborated on the idea.