It was absolutely not used in Shadow. Shadow's engine was a tweaked version of the Heroes engine. For example, think about the difference in spindash between SA2 and Shadow. Also, think about how fast the character accelerates in SA2 compared to Shadow.
They didn't used it for Sonic Heroes cause Sonic Heroes plays a lot differently, controlling 3 characters and all.
But they still could've used the SA2 controls. You control only one character at a time anyway.
I read about it in a Sonic site when the game was released. But now that I look at the character models and acceleration, I think you're right. It must have been misinformation.
They wanted to make a full graphical upgrade and add all the team stuff.. Maybe it was easier just to make it all from scratch rather than just tweaking? I don't know..
Sonic Heroes is a fun game. I don't think the engine is really that bad.
I think the best engine most certainly is SA2's though. They should bring that back one of these days. And chao gardens.