I'm a bit confused about whether or not Gnome-shell is a new distribution or just a desktop environment? Will shell be available to install and use instead of Unity?
gnome-shell is just a shell and not a new distribution or desktop environment.
The Desktop Environment is Gnome and
gnome-shell the shell comes with version3 of Gnome Desktop Environment
Please don't confuse gnome-shell or unity with Window Manager too. Both of them are not window manager. For gnome-shell the WM is Mutter and for unity WM is Compiz.
Availability in Natty
With respect to availability of gnome-shell in Ubuntu, it won't be in 11.04. It is present in a PPA. There were some valid technical reasons for keeping it in a PPA. This bug discusses the issue Quoting from it
Due to the state of the GNOME3 stack in natty, we won't be able to upgrade gnome-shell to 2.91.x. In addition, due to libraries that have already changed, (Bug #685225 and Bug #677382), gnome-shell is currently broken. We also have the xulrunner-2.0 transition to consider. Due to all this, we believe it best to remove gnome-shell from natty.
Also I found a mail titled Status update on GNOME3 and natty sent by Sebastian Bacher dated Jan 20th 2011. It contains a lot of status updates. Go through it.
Instructions for trying GNOME3 (and GNOME Shell) are at this question: