Well, it's looks like it's based in March 2006 rumor (or maybe it wasn't?), but some videogame pages are convinced of the sequel's inminent coming:

http://www.meristation.com/v3/des_noticia.php?id=cw4416...pic=PC&idj=4872&idp=

If you understand nothing, you can ask for a translation I will make soon. Now read!

WHOA! Here's the english version!

http://www.joystiq.com/2006/03/15/beyond-good-and-evil-2-rumors-surface/

...

It's wrong. They were working on Rayman 4 at the time, which later became Rayman Raving Rabbids. So the rumour's definitely wrong.

Humm...maybe it's wrong, but I don't think it's because of Rayman 4 RR, because at that time the game was almost finished and presented at E3, and the article talks about "ending pre-production of BG&E 2", so it's very unlikely they confused both games.

You're not being very optimist, are you, fellas?

They were actually working on preproduction of BG&E 2 after they released the first one, but of course the bad sales and the fact that Peter Jackson asked the team to create a King Kong game forced them to stop working on it. That's where the rumors come from. Unfortunately, after King Kong they didn't continue work on the sequel and made Raving Rabbids instead. I'm not sure whether or not they're working on Raving Rabbids 2 now, some websites say it's Ubisoft Paris that's working on that one while others say it's Ubisoft Montpellier again. The only thing we know is that Ancel wants to create a sequel, the only question is when and if Ubisoft will give the green light for it. It's not that we're being pessimistic, we're being realistic.

I know you're realistic, but it's hard for me to believe that there's not even a PLAN for the sequel...I'm sure Michel Ancel is trying to do something at this time.