Jagex CEO Mark Gerhard has indeed confirmed the cancellation of MechScape, although you wouldn't quite know it from his comments, which seem excited to be working on a different title with a new direction. This isn't the first time an in-development MMO has been rebooted in favor of a completely new direction, although Tabula Rasa at least kept its original name.
Why the sudden decision? According to Gerhard, MechScape wasn't able to avoid the same pitfalls of RuneScape. Of course, making such a move is going to cost Jagex millions, but their current financial success will be shouldering the weight. The new game -- known as Stellar Dawn -- should be coming in 2010 and will be based on the MechScape graphics engine.
The big changes planned for Stellar Dawn are content and combat focused, although no specifics were given by Gerhard. It's a bold move, no doubt, and sometimes this industry favors such decisions -- other times it punishes them significantly. Whether you look at this as stalled (Tabula Rasa) or prolonged (everything Blizzard) development, you have to admit it creates a notable amount of interest in Jagex's 2010 game.