Life has taught me a zillion times over to never buy into the story of the scrappy underdog. 9/10 it's completely fabricated where it turned out actually no they were a multiberyllionaire oil baron who had everything they needed to succeed 30 times over. Even that other 1/10 times it's still a massive stretch of the truth where the person in question was more than prepared for what was ahead of them. People naturally embellish their opposition and downplay their capacities; and underdog narratives crank that natural tendency up to 11.

You don't necessarily need a lawyer on-hand to figure out "legally distinct". Everything that Nintendo has taken down before has blatantly used the name and existing characters in both name and likeness. Even if the core idea when they started the game was "pokemon but with guns" - which I doubt - it's still a good start in the vein of "inspired by" instead of "ripping off" and I bet Nintendo knows this otherwise Palworld would have been hit just as quickly as the mod was considering this is a company who made themselves infamous for going after youtubers making let's plays of a basic racing game. They're famously litigious so they're going to be watching Pocketpair and Palworld like vultures after their next meal but either Pocketpair are more careful than they'd like the public to believe or their idea is different enough from the get-go that Nintendo will never get anything on them.