This recent post to the project's Facebook page sums it up.
Last month we proudly showed off a demo of what we've accomplished with S2HD.
Needless to say, more work has been done on the game; unfortunately, the odds of this work every seeing the light of day is slim to none. We gave the project's Lead Programmer, LOst, a week to provide us with a DRM free build of S2HD.
We've heard as much from him as you have, so it's safe to assume that's not going to happen. Given his complete lack of communication and cooperation, it falls upon to LOst to assume full responsibility for his actions as, up until the demo was released, the project's leadership was unaware of both the DRM and the now infamous DirectInput bug. This was the last straw for us. He had ignored direct requests for the past two years, effectively holding the project ransom by refusing additional help or review on his private engine. If he didn't think a piece of artwork matched his vision for the game, it was not included, or worse, was replaced by assets of his own creation. The same thing happened with the excellent multi-format sound engine our Tools Programmer Saxman created. Ultimately, LOst is no longer a part of the project.
That's the good news. The bad news for the project far outweighs it unfortunately. We cannot replace our lead programmer as LOst kept the source code for himself, making it impossible to the coded source material to be updated or used as a base for newer builds.
Additionally, two key staff members, scanline99 and Cerulean Nights (both of whom were chiefly responsible for the many animations, spritework, and overall polish seen in the demo) have resigned from the project to concentrate on independent works and careers. While we wish them the best in their endeavours, what this means to the project is that they will no longer be producing any artwork for it. Without them we are not able to guarantee the same level of quality seen in the alpha. At the moment, with ongoing careers and kids to look after, both myself and Canned Karma don't anticipate that we'll have a great deal of time to devote to S2HD either, which means we're forced to announce that
Sonic 2 HD is officially discontinued.
Certainly the DirectInput bug and the blogosphere fallout over it didn't help matters, but by the time that had taken place we had already made the decision to discontinue the project almost two months ago, well ahead of the demo's release. Internal conflicts between the project leadership and its main programmer which reached critical mass, and the only thing holding it together was the collective determination to put our frustrations aside and get a playable build into the hands of everyone who waited years for it.
Hopefully, another group in the Sonic community will pick up the torch and go forward with the vision we had over a year ago -- not just creating a Sonic 2 remake, but creating entirely original content.
Thanks to everyone who supported the project, especially to the passionate classic Sonic fanbase.
The appreciation thousands of fans expressed to S2HD as a game made "by fans for fans", represents a landmark where SEGA has to look at for a profitable use of the -highly demanded and beloved Classic franchise.