Big blue is still on the fence, but game development seems likely.
Although Nintendo had only revealed their new Nintendo DS system a week or two ago, it was pretty obvious that the backbone of the system was well in place, meaning development kits were surely completed.
This appears to be the case, because according to a report in the Nikkei Keizai, Sega has been confirmed to be in posession of some form of DS hardware. The official word from the company is that they are still evaluating the system. Considering Nintendo usually doesn't give these things out for free, however, it would be a rather safe assumption that Sega will be making games for the Nintendo DS at some point in the future, perhaps even as soon as now in order to have a game or games ready for the system's launch toward the end of the year.