Nintendo is sueing Yuzu

Here's hoping Nintend'oh gets laughed out of court. Didn't it already get settled that emulation is perfectly legal? Particularly by a Nintendo suit before?

Emulation itself is legal, which is why the complaint is about circumvention of protections under the DMCA.
Nintendo alleges that Yuzu does that, and while it needs the help of prod.keys for it, yuzu does give instruction on how to obtain that. Nintendo argues that this shows how Yuzu is there (primarily) to break their protections.
Now, Yuzu has some defenses.
It may argue that the point "limited commercially significant purpose or use other than to circumvent a technological measure that effectively controls access to a work protected" may be moot, as yuzu has no commercially significant purpose. The 30k they get per month in donations won't help that case much, but a nice calculation about 212 contributors to the project over 10 years may soften that counter argument.
It may argue that Yuzu allows disabled people better access to games, as their controller configurations are way more open than Nintendos.
It may argue that they (or more specifically the prod.keys issue) is covered by Interoperability. I.e. they are making an Emulator for Homebrew (100% legal). Now that they have this work, for interoperabilities sake (of Yuzu with official switch games), they include instructions on prod.keys stuff on their homepage.
Most realistic outcome (as I expect):
Yuzu is taken down, the open source project continues, but at a much slower rate. The Case is dropped.
The outcome that I'd love to see (but seems way less realistic):
Yuzu gets a significant bump in donations from people angry about this, decide to go to trial and wins.
Result: Yuzu gets more money, Nintendo has cemented more protections for Emulation.
- Unfortunately, Nintendo has some decent counterarguments for those defenses.
  17 USC §1201 (a)(2)(B) can be left up for interpretation around its phrasing. If you interpret the condition to meet the criteria being Yuzu must not serve a commercially significant purpose other than to facilitate circumvention of DRM, that actually works against Yuzu. The emulator itself serves no commercial purpose, which suggests it has no reason to exist other than to circumvent technological measures.
  For as much as Nintendo hates third-party, unlicensed peripherals, they could point to the 8bitdo adapter and plethora of disability-friendly Xbox/PS5 controllers to weaken that argument. If the primary purpose of Yuzu was to fill a gap in accessibility, Nintendo could argue that Yuzu would have stopped development once other options became available.
  17 USC §1201 (f)(1) only applies to (a)(1)(A). That protects the developers in creating the emulator, but Nintendo's lawyers would remind the court that they're suing under (a)(2), which also includes distribution of circumvention tools.
  It gets even more bleak.
  Nintendo could demonstrate Yuzu fulfills (a)(2)(C)—the marketing of the product with the knowledge that it's used for circumvention—by referring to Yuzu's own documentation on its wiki and setup guide instructing users that they will need to dump and use prod.keys to play games.
  The last criterion needed is (a)(2)(A)—which is that Yuzu was primarily produced to circumvent DRM. Yuzu's documentation and guide do not work in its favor, and the preservation/interoperability argument is weakened by the fact that the console is still readily available in retail. There's a good chance they can't even successfully argue it was created for development purposes. They would need to have a stronger argument than Nintendo's lawyers, and it's going to be really difficult to claim it was made to make Switch development/debugging more accessible than Nintendo's official devkit when they've never (for obvious reasons) had access to the official devkit or went through the process of applying for one.
  If it goes to court, Yuzu would need some really deep pockets, good lawyers, and a technologically competent judge. I hate to say it, but the most likely outcome, in my opinion, is a settlement giving Nintendo exactly what they want.
  I would love to see the EFF or some philanthropic multimillionaires bankroll Yuzu throughout this and set a precedent in their favor, but like you said, it seems way less realistic.

Can you imagine Sony losing their shit because they found out people were watching Hotel Transylvania on non-Sony brand DVD players?

Yup!
https://en.wikipedia.org/wiki/Bleem!#Sony_lawsuit

goddamn it, I really hope that Nintendo will get laughed out of court, but it seems to me (IANAL) that they may have a case. Although Yuzu will have some defenses as well.

Ars Technica has a writeup about this, that seems decent.

They expect that this won't go to trial, because yuzu won't be able to pay for it.
Maybe the community should think about changing that.

I'd float 'em a couple bucks to fight Nintendo. Nintendo's track record for these types of cases is terrible. Reading their arguments, this doesn't look any different from other cases they've made against emulator developers or 3rd party cart developers; which Nintendo has all lost.

The switch also allows people to unlawfully play pirated games.

I'd love to see that happen "Your honor,..."

Fuck you Nintendo

Lets sue knife companies because someone got stabbed with one of their knives

Yuzu is meant to be another console, were lawfuly obtained games for the switch console can be played. If someone used it wrongfuly, its not yuzu's fault. (Not that I pay for switch games, but that's what's stated in yuzu's website and terms)

Either yuzu fights in court, or doesn't do anything, or they take yuzu down and fork it to Zuzu or whatever they come up with