The controls isn't really a money problem.
Sonic Unleashed took 3 years to get everything together. That must of clogged a lot of money along the way. If Sonic Colors was made on an HD consoles, ALL daytime stages, bigger and longer. That would sink a lot of money.
Yes, Sonic is Sega's biggest star. But why go HD? Why not just make it for the Wii, take half as much time making it, half as much money, and double the money made. I know the Hedgehog engine is already made, but that doesn't account for totally new things like colors powers and super long levels with super details.