They had the respect of Nintendo and could have easily continued that partnership.
Nah. Nintendo had no place for Silicon Knights by then. In the end, the break up was mutual, but at the time Nintendo's change in policy (ie: less of a focus on hardcore gamers) was already pretty much in place, and they didn't really care about companies like SK anymore. Not too long before that, Nintendo told Rare to "stop making games for them", just before Microsoft bought them, so there really was no way these companies (SK and Rare) would have stayed with Nintendo, even if they had wanted so.
If they can pull it off. How do they justify discovering they need less money to make more content? Especially with their history of delays and going overbudget? Game looks interesting, but I think it's a given they'll run out of cash long before it's fit to be released.
This is a valid concern. However, it's safe to assume that they would have a near-finished product by the time they run out of funds, and at this point it's much more likely that a publisher will pick them up and throw in whatever money they need to finish the game.
This is going to be a low-budget game, though, and it's going to show. The descriptions we are seeing in their kickstarter already show gameplay mechanics which seem pretty much a copy&paste of Eternal Darkness', an 11 year old game. It's possible that they had ideas for something a bit more different, but then decided to throw those out in favor of something closer to a remake of ED to be able to meet the lower kickstarter goal. My point is, I don't see this game being delayed as much as the original ED was, or Too Human.