This game is stuck in the development limbo known as Vaporware. Few to no details have been released about its gameplay, plot, or release date since its announcement many years ago. It may or may not be in active development, but neither has it been cancelled officially.
Phantom Dust 2 is a reboot of the original. The game is no longer in active development, Microsoft's Aaron Greenberg told Gamertag Radio in an interview at E3 — but it's also not canceled.