Harry Potter Online is indeed in production, although this comes with a serious caveat.
The production website for Harry Potter Online is up and running with forums, a gallery, and some basic information about the game. However, it looks as though developer Bio-Hazard Entertainment has yet to receive the full go-ahead from Warner Bros.: "Seeing that it could be a really great business plan, a license was given that would allow the company to begin production on the MMO up until beta. Once beta was hit it would then be decided [by Warner Bros.] if the production would be a good investment or not."
The proposed Harry Potter Online would allow players to choose to attend one of three schools of magic, take on roles like Aurors and Lamorians, and become masters of various professions such as potions and herbalism. And yes, if you were wondering, there will be Quidditch.
The developers said that a promotional video, trailer, and live interview will be coming soon. You can see some of the game's concept art and hear the devs talking about the game in a video after the break.
[Thanks to Cherie for the tip!]