Other than The Force Unleashed, it seems that LucasArts has another whole project that they are working on. And the more games being made, the less time they can spend on K3.
On May 2, 2007, LA had a press release that introduced their newest project: Fracture. This is a non-Star Wars game based on combat in which the PC can control the land itself and use it to his advantage through futuristic weaponry. It sounds cool, but it isn't a KotOR game. :(
You can read the whole press release here:
http://www.lucasarts.com/company/release/news20070502.html)
Here's to hoping that K3 is still in development, even if there are other pet projects for LA's programmers.