If there's no citation for this claim, it should be removed.
Ya, this is kind of surprising... I mean, I can see how they might have used tapes when first putting some of the Handy's hardware together, just to have something to run as test code or something, but the sequential read issue notwithstanding, I've never heard anything about this before, and I've read a fair number of first-hand accounts re: the Lynx's development from RJ Mical, Dave Needle and Dave Morse. By the time Epyx took the Handy to Japan to show the Nintendo brass, it was definitely a cartridge system, and though the system hardware was finished, the design had not been finalized at that point. They must have abandoned the idea of a tape drive very early in the development of the system...