ultimately, the cancellation of another game forced Sakurai to rush something into production & he determined the fighting game would be quicker to make
that's where Iwata came in—because nobody else was available, Iwata came in on weekends and programmed prototypes for both of Sakurai's proposals, just to get the ball rolling
again, this has been discussed publicly at length, including with Iwata for Iwata Asks iirc
Sakurai doesn't think Iwata was thinking in terms of mortality at that point, but his passing did, in its own way, reinforce the validity of that way of thinking