According to a report from Eurogamer, Michael Ancel, famed Ubisoft game designer, stated that the sequel to the critically-acclaimed Beyond Good & Evil was chugging along, despite rumors of cancellation. The game is being developed by a "smaller team" (Ubisoft Montpellier) in order "to preserve creativity and so the game doesn't become a commercial product, so that is has soul." That last quote is enough to give a thumbs-up of approval.
Ancel also added that BG&E2 will employ the same technology as the newest Rayman title that was announced during Ubisoft's E3 press conference. He also mentioned that this technology will be able to help "preserve the artistic spirit."