Yeah, they were originally making a game with a rabbit-like character that could grab items and enemies with his long ears, but they thought it would be a better idea to make a faster game, thus Sonic was born, and they reused the idea later to make Feel, which was later changed to Ristar.
If you haven't seen it yet, I have a few scans of the Feel prototype at my site
http://www.sonicdatabase.tk
And by the way, Sonic Advance 2 is going to feature a new rabbit character, probably based on the very first design.