Retro Studios is not as big while not deep into game development as people seem to think.
Every time they have a project in full swing they go on a hiring spree, when that is not the case they clearly downsize and keep only a skeleton team. That's precisely why some talented people tend to leave, waiting for the next wave is not their thing.
I do agree Retro Studios needed to branch to two development teams, and have that extra personnel give a boost on both teams. But that's sometimes not feasible, if one team becomes stuck in prototyping or dev support (what happened to Nintendos second Monolith Soft team, actually)
As for what they're up to, any guess is a guess; but they might do support on things like dev tools, western dev support (
like NST does), they are also known for having contributed assets to Mario Mart (albeit MK7 3DS, but there might be uncredited work out there), same as Monolith basically, (where Yasuyuki Honne even did the animated opening for Skyward Sword).
Nintendo is known to outsource stuff like prototypes, those are obviously always uncredited.