It was prototyped by Day 1 Studios but -- and this is according to Wikipedia -- THQ cancelled the game. I wish I knew the timeline on when this was originally worked on. Does it pre-date Batman's game revival with Arkham Asylum and Arkham City? Were there guys at Day 1 that migrated to Rocksteady to work on Arkham Asylum and City? I'd love to know.
The one thing I do know is that the cape technology is crazy. In the same vein as Dead or Alive's Boob Physics™, there seem to be too many ruffles, too much waving, too much motion, but you just can't take your eyes off the darn thing!