Its been scrapped. They did bits, but nothing more. Also, think about this.
FL2 comes out. Uber graphics. Graphics that require a PC from space.
Half the community go's to FL2. The other half, which can't run it, stays here.
No new people join the community which focuses' on "FL1", since almost every new computer can run the sequel.
Community dies.
Microsoft will not do it for the same reason they shut down FL in the first place. MONEY!!!
I have a friend who worked for MS in the gaming division and he told me that the reason FL was killed was because it failed to perform to MS's expectations. The ROI was not sufficient to continue the venture.
I'm just glad that we have this place. Now if we could just get a WOW server... heh