The game’s story is said to begin at the Kyuubi Invasion. (I think that’s chapter 501 of the manga: The Nine-Tails Strikes. I don’t read the manga, so I’m honestly not sure.) Together with the story, players will be able to enjoy large-scale battles that use everyone in the village.
Considering this doesn’t come from our usual Jump source (Tale Tale Source), we’re marking it as a rumor. Though, Game Jouhou did correctly report on Okami HD before its announcement last night. Then again, this probably originated on Japanese message board 2ch. We’ll just have to wait for confirmation.