The recent Q&A with Imagineer Joe Rohde on the Disney Parks Blog hints at the fact that the project is still alive. I think this is the first time its been mentioned on the blog since they posted pictures of Joe and James Cameron exploring the parks. Quotes from the article:
(Interviewer) I recently had the opportunity to chat with Joe about the award and his career at Walt Disney Imagineering – which has included such enormous projects as Disney's Animal Kingdom Theme Park; Expedition Everest; Aulani, a Disney Resort & Spa; and the upcoming AVATAR project at Walt Disney World Resort.(Joe Rohde) When I think about the AVATAR story and Disney’s Animal Kingdom, I see the value systems that underlie both. We have the opportunity to tell that story in a way that will make the AVATAR experience feel like a natural part of Disney’s Animal Kingdom.