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 two 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that the smaller device's touchscreen is unusable and that their internal staffers are struggling to fix UI design work originally made by "an outside party" is troubling.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]