According to media reports, the house will be demolished to pave way for a new structure to be developed by Sri Thyaga Brahma Mahotsava Sabha. Recent verdict by supreme court is available at:
http://www.dinamalar.com/2007may02/general_ind12.asp
Saint Thyagaraja's house - Supreme Court decision
My take on the memorial (post-demolition) is that the Thyagaraja mahotsava sabha wanted to outdo the Kunnakkudi organization which had all the pomp and pageantry during the Aradhanai. After all they own T's ancestral house. They wanted to attract people to their memorial. It is a mixture of taking credit, playing politics, and what else. Any time such a memorial is proposed it is bound to elicit praise as well as criticism. It is all in the game.