Am I the only one who is thinking of the following:
Project: Red is to Redpower what OpenTTD is to Transport Tycoon Deluxe, in that the first is a reimplementation of the second.
Buuuuuuut I don't know of any drama that sprung because of OpenTTD vs original TTD
Other things that come to mind are h.264 vs x264, Microsoft SMB vs the Samba project, the Win32 API vs Wine, Windows 9x vs ReactOS (which someone here already mentioned), etc. but in these cases the original project is just closed instead of also having been abandoned or discontinued.