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I really don't think they've got any reason to think they're making a new Medievil, other then the fact they made the first two - I'd say it's far more likely they're working on their own new IP or something though. I don't think Medievil is a franchise that the mainstream public are going to buy in droves, although it might give Sony another family friendly type game in their arsenal, I guess, especially if they want to go after the Wii market.

I'd absolutely love it though, awesome games. So ahead of their time too, I always think they were Ps2 when I remeniss.