I'm not going to question Beatlebum too harshly since there's really little incentive to come on here and spread a rumour that could be false. But, apart from Matt's dismissal, it doesn't make sense since Neil can (and does) work with his sons in various other projects.
So...what's the distinction for Neil in writing if they are going to be in Crowded House? Will everything just be Crowded House?
It's the same reason that I never saw the sense in Tom Petty having 'solo' albums; he ended up recording with the Heartbreakers on those records with the same producer while the sound on those records weren't worlds apart from a Heartbreakers record.