Why hasn't Donkey Kong 64 been released on the Virtual Console? Developer Rare doesn't know, and don't seem to care really.
To clear things up, yes Microsoft does own Rare now - who were a second party developer for Nintendo when they made DK64. However, as Nintendo owns the Donkey Kong franchise they are able to release it again on Wii (ala the Donkey Kong Country series). This isn't the case for other games developed by Rare during their time with Ninty, such as Perfect Dark.
Recently asked why DK64 hasn't been re-released yet a Rare representative said "I have no idea why DK64 hasn’t shown up yet, and whether Jetpac would still be in there or they’d replace it with Mario’s Cement Factory (which ate about three years of my life as a child) or something. Or maybe a single-screen 2D shooty version of Jet Race would be more appropriate. Who knows? Not us, obviously, or we wouldn’t be sitting here pitching clueless alternatives."
Obviously they don't really care that much, seeing as they wouldn't get much out of it. And, to tell you the truth, they're probably tired of answering questions about Nintendo's Virtual Console, with the whole Goldeneye debarcle and all.