Myspace has become a promotional tool for films, bands and more and having a website on myspace about this project may have been seen by the "powers that be" at Lucasfilm as promoting Reborn to a wider audience than just the fan community.
By this letter, we request that you immediately suspend and/or disable the account of the above website and/or that you immediately remove the Unauthorized Items from the above website.
It seems in legal terms that they are only requesting that the website be removed but it doesn't state anywhere that you are not allowed to continue the project, just that you are not allowed to promote it in this manner. Myspace has become huge and it isn't just for star wars fans. Forums, like here at OT.com, are smaller and are less known outside the Star Wars community so any fan edits are not promoted in the same manner as they would be on MySpace or by having a specific website.
Personally, if i had received a letter like that, then i would continue with my project. As i mentioned earlier,it only mentions the website, not the edit. There were a few sites on myspace that were promoting fan edits for sale ( although they were saying that it was only to cover costs, which £10-£20 a shot is way above any costs). these were closed down pretty quick so maybe they are just clamping down on MySpace sites before anymore of these type of sites pop up.
I think that if it was just about the edit then we would be seeing Lucasfilm attempting to close down this site. I guess only time will tell