I don't think that qualifies as 'HyperLoop' even if they keep the name. It's like building an airplane except you use it underwater, sorry that's a sub.

That said, it suggests that the HyperLoop concept is not viable which is not that surprising IMO. However, it might also just be a case of lower R&D costs.

"Cancelled" by who?

Hyperloop One is by far the most credible project, with HTT somewhere behind them in second. They haven't revealed anything about their compression systems or lack thereof. HTT has backed off air levitation, but they're still using Inductrack which is radically cheaper than conventional MagLev and hasn't been applied commercially yet.

Several of the competition teams (like the one in this article) have built MagLev sleds with nice brakes, but they're just trying to win a speed record competition. That has no bearing on the real Hyperloop. Other teams are focusing more on scalable tech and doing some pretty innovative work.

The lower per-vehicle capacities also aren't a negative if launch cadences can be kept high enough to maintain throughput. Smaller vehicles let the network operate in a more point-to-point manner instead of the stop-and-go crap that trains have done since day one.