Nintendo has never publicly released the tools required to build games for the N64. The tools that he used during development (specifically the libUltra library that helps programmers talk to the N64 hardware) therefore are not legally his to use, nor does he have legal rights to distribute software built using it.
As such, Valve is stepping up and asking the project to halt because if Nintdo wanted, they could cause legal troubles for the developer and/or Valve. Since the Portal name and assets are in use, Nintendo could go after Valve as well for seemingly "supporting" unauthorized use of their proprietary tools.