I think for me this news is especially compelling because it's the first time we've seen Nintendo able to take a stab at flash cards. With their initiation of the recent FBI raids here in the States, they were only able to attack modchips, because our Supreme Court has made it clear that it is legal to make a "reasonable number" of copies of your legally own media (again, just to be clear, only from the hardcopies -- not from downloads, which is still very much illegal).
I'm guessing the politics in China allows for Nintendo to strike where they couldn't before, and probably at the heart of their real concern. I doubt modchips are as prevalent as flashcards, because modchips aren't as practical to use for most folks. The DS is also the bigger system with a much, much bigger library of games, therefore there's more to lose when it comes to creative works.
Huge hit to the community, I think. But as mentioned in a previous post, knock one down and three more are likely to take its place.