The code compiles 1:1 back into a unable ROM but isn’t made just using a source code leak. It is reverse-engineered just like the SM64 decomp

Decompilation means it's still derived from copyrighted source code. It's not a clean-room implementation where one person analyzes the engine, writes documentation about details of that engine, and a completely different person writes a new engine. It's not even a grey area. The correct procedure is clear ever since back in the day "IBM compatible" were created.

If it were up to me, copyrights would work like patents: After 25 years they're void and people would be completely in the clear to decompile, modify, and redistribute old games. Sadly that's not the reality.