It's not legal in that it uses assets that are copyrighted intellectual property of Nintendo. It could very likely get taken down eventually as other similar projects have been, but on the other hand, a lot of similar projects have stayed up for a long long time. Take Radical Dreamers, the Chrono Trigger spinoff. It uses assets from Chrono Trigger that are the intellectual property of Square-Enix. But it has such a small target on its back that it's never been taken down. Similar story with less ambitious ROM hacks that just change things around, like Zelda haha that let you play as a Moblin, etc. Conversely, games like AM2R and Pokemon Uranium were taken down and put back up multiple times over the years. As to your final question, yes, it's a very common pastime. But it's very very rare to see one as ambitious and polished as this one.