People that don't know what they are talking on these podcasts, need to stop reporting this type of stuff. Just like the last reporting on fable comments that took things out of context ( even after the poster that made them explained ).
"engine issues"? that makes little sense. Either the 3d game engine supports something or doesn't, or it does something well or doesn't.
The question is what is scaled back? The scope, the size, the playtime, the graphics, the physics, the audio, the game design, the story, etc... ? Games scale back on various elements all the time with the public hearing anything about it. These podcast guys are making statements that only lead to threads on forums like this one with every single person assuming they know what X means.