We have known that Namco has had a Xenosaga title for DS in the works for some time, but today 1UP is reporting that the title is a port of the previously-released Xenosaga I and II, completely converted to 2-D.
Several FMV cutscenes from the original games will be included in the title, though many will be adapted to the game's 2-D engine. The battle engine appears to be primarily based on Xenosaga I's.
Source: Xenosaga 1 + 2 DS Announced (1UP)