Rumor Reporter has confirmed that Incognito's Warhawk is the subject of the site's ominous story posted early this morning. An anonymous source working on the title has allegedly told Rumor Reporter that development has "stalled completely." Supposed "infighting and lack of clear direction" have led to a swelling budget; in turn, prompting layoffs and employee migration.
SCEA has apparently brought in a new director who may be considering a significant change of direction for Warhawk. What was once a high profile title (the first to utilize functioning Sixaxis motion control), may now become a simple downloadable game. Rumor Reporter suggests that Warhawk's four complete missions could be destined for PlayStation Store. Another Gran Turismo HD? Perhaps. But, for now, this is strictly rumor.
We did contact Sony for a statement. Here's the predictable reply: "We haven't made any official announcements regarding Warhawk since last year. At this time, we have nothing new to report regarding this title."
Update 1: David Jaffe weighs in on the rumor; here and here. [Thanks, Kiel & Robert]
Update 2: New info from Rumor Reporter.