Does Nintendo still try to keep everything on their consoles G-rated?
Short answer: No.
Long answer: No, and I don't think they ever have.
Ultimate version: Madworld. No More Heroes. Turok. Shadowrun. Red Steel. Conker's Bad Fur Day. 9 Hours, 9 Persons, 9 Doors. I could go on.
On topic...this looks interesting, though I question how well it will work. Even with a vibrating function built into the controller, it won't have the same impact of a real swordfight. Still, watching this.
Before the N64 Nintendo were really restrictive about what was allowed on their consoles, and weren't shy about requiring games to be edited so they were family friendly.
Also it says what controller they're thinking of using on the kickstarter page. The "Razer Hydra controller." Whatever that is.
Shadowrun was a Super Nintendo game. Despite not having blood, there were lots of guns and violence, with a bit of implied sexual content.
Anyway, a Razer Hydra is basically a Wiimote for PC. There was a promotion on Steam for it a while back, basically it allowed you to play Portal 2 with motion control.