While I doubt it would have made production (because it would have been much closer competition to the Mustang than it already was), there were if I remember correctly a couple of test mules with the DOHC engine (in 98, I would imagine they would be testing the C headed DOHC as it was introduced in the Cobra in 99, so it would have been planning stages in 97/98), along with supercharged versions, etc. It was a nice platform, and using it as a test mule would have gotten the spy photographers away from trying to out the Mustang at the time.That sounds like fan fiction to me.
Also, I believe the correct usage would be that Ford used a lot of the MN-12 parts on the FN-10 (Mark VIII), not the other way around. The MN-12 came first after all, and the FN-10 got the more "refined" items such as aluminum driveshafts, differential housings, and lower control arms while we lowly MN-12's got stamped steel/cast iron/ and two piece doom wobblers.
Also, while yes Ford was pissed at how much money the MN-12/FN-10 platforms cost them, even though they have since used it to develop most of their current car lineups (IRS rear suspensions in everything from Explorers/Expeditions up to the 99-04 Cobras and the current gen Mustangs), longer wheelbases, etc. The MN-12 was the first "modern" RWD platform form Ford, and they got quite a bit out of that initial investment if you were to ask me. However, "personal luxury cars" were at that time a dying breed. People weren't buying 2 door cars, RWD was out of fashion, and the big three were still recovering from horrible build quality and customer opinion from the late 70's-80's. The MN-12 platform was and is a great platform, but it came at the tail end of the desire for those kinds of cars. Those of us who have driven them appreciate them, but they weren't as appreciated at the time. It's similar to how hard it is to get a manual transmission anymore. It's so much easier to program an automatic to get you the desired emissions results/shift strategy/fuel economy and everyone can hop in and drive an automatic, so manuals are a dying breed.