Credit must go to Game Daily for actually providing evidence that Fangus has been cancelled:-
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One of the members of the Oddworld team, in his March 30 blog, implied that the company's next game, code-named Fangus, had been cancelled and that the people not retained as part of the reorganization will “be broken up and spread around the industry.”
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Fortunately, Mr Bloom does not say or imply that. He says that
OWI will not be producing Fangus, and says it's a shame they did not get to use the Stranger Engine on that project. That's nothing along the lines of the project having been cancelled given the news that OWI is outsourcing development.
Thanks for redirecting people to the GameSpy article, Al. It seems in times such as these, people like to cling to buzzwords and brash headlines rather than take in the things that are actually said. Thanks too to Oddguy for getting rid of that hideously misleading ‘Oddworld is dead’ subject title.