To the older gaming generation, this may seem somewhat similar to the Starpath/Arcadia Supercharger that was used on the Atari 2600. There, the device allowed the gamer to buy games on audio tape and play them, one level at a time, into the Supercharger. This hardware added a full 6Kb of RAM to the Atari 2600, consequently allowing more complex games than the original hardware with its meagre 128 bytes of RAM had allowed. In recent times, this hardware has provided a path to developing new homebrew games. It also allows for pirating of some games.
One main difference between the Supercharger and the GBA device is the time period in which was available. In the time of the Supercharger, consumers didn't have access to the hardware and software to pirate normal games sold on cartridge. The internet didn't exist to swap ROMs with your buddies all over the world. It wasn't, really, until the Cyberpunks CD that things like that could really take off. In fact, one might say that the WAV to BIN tools, originally developed by Bob Colbert, are the real key bit in the Supercharger and 2600 toolchain. The emulators available are good, but there is still no substitute for the original hardware.
The catch with this new device is that Nintendo could see that Atari 2600 homebrews revival and consider this a way to sell more GBA units. Make it an open platform, and some good games will get made and people will buy the hardware to play those games. Any GBA unit sold is probably going to bring in at least a couple of brick-and-mortar-store software sales, which as we all know is where the real money gets raked in by the handfuls. That's one scenario. The other is that a cloud of evil pirates buy the hardware and never buy enough games for Nintendo to make their next profit estimate. Unlicensed games that aren't in line with Nintendo's image could appear. Frankly, I think the former is more likely given the developments on the 2600, but the latter probably is enough to scare Nintendo into closing this door to home development for their principal money machine. And by the time the 2600 development tools were free to everyone, there wasn't even much of an Atari anymore to lose money.