CVG writes that Joy Ride, the Mario Kart clone from Microsoft’s side, has been pulled out of it’s original free Xbox Live Arcade slot and retooled into being a launch game for the soon-to-be-renamed Project Natal.  Guess they couldn’t handle the heat from ModNation Racers.

The full skinny:

Microsoft’s arcade racer Joy Ride has been reworked as a Natal launch title, CVG can reveal. According to a senior retail source, the title will be available on Natal from day one later this year – and will no longer be free-to-play. In development at first party studio BigPark, the avatar-based game was unveiled as a free-to-play Xbox Live Arcade title at last year’s E3.

Having initially been due for release in late 2009, the game was reported to be missing in action earlier this week after its listing was wiped from Microsoft responded to requests for comment by saying that it planned to “bring BigPark’s vision to life in 2010”, adding that it had “nothing further to announce at this time”.

Our source told us the game had been “completely reworked” for Natal. “The hope for us is that it will be a boxed release – we’re still in the dark on that one – but it’s definitely for Natal and will definitely be here for launch,” our source said.

“We’ve been told it will no longer be free to play, but that it’s been completely reworked into a bigger, richer game than before. They’re putting the final touches to it now. The biggest thing for us is that it just works with Natal’s racing controls. We’re reliably informed it’s very intuitive.”

It’s due to be unveiled on Sunday, June 13 at E3 2010 – the date of Microsoft’s special Natal-centric event.

CVG has contacted Microsoft for comment.