According to Dark Horizons, it's true:
"Asylum" and "Young Adam" director David Mackenzie has selected Tilda Swinton to play Nico in his upcoming biopic from a script by David and Janet Peoples (Blade Runner) according to Suicide Girls. Nico (born Christa Paffgen) was a fashion model, actress, and composer. She is best known as the female lead vocalist (along with male lead Lou Reed) on the 1967 debut album by the American rock and roll band, The Velvet Underground.
This is a great choice. I think she is a great actress, but I wonder if she'll be able to handle the singing.