The source is anonymous, but sounds like someone who either worked for the project or somehow has a lot of insider knowledge of it. They say a good chunk of the Danger/Sidekick team that Microsoft purchased for their phone knowledge actually has been let go or left on their own, leaving "no braintrust that understands how to build a project."
What's even more interesting is that the tipster says the staffers on the team hate the phone, and feel like they're just being used to goad the Windows Mobile 7 team into stepping it up. Other details like the fact that the project might be 2 years behind schedule, that the smaller device's touchscreen is unusable and that their internal staffers are struggling to fix UI design work originally made by "an outside party" is troubling. [MobileCrunch]