I did post something about this recently, but SWBF3 threads tend to die fast on this site so hopefully a few more people will see this one. I have a bit more info here which is mainly the perspective of a dev at Rebellion (link here), and again saying that not only was SWBF3 cancelled, but a fourth game as well.
"Rebellion was signed up to produce PS2 and PSP versions of Battlefront 3; Free Radical, as you all know, was working on the next-gen (as it was then) versions. We'd work on hand-me-downs of assets from Free Radical (who, I believe, had had a while's head start?) to downgrade them to PS2/PSP quality and get them running on our builds. We were expected to mimic FR's game as best as we could given the weaknesses of the platforms we were developing on.
For whatever reason, Free Radical appeared to be having development problems. We weren't actually *receiving* the assets we needed to work with in a timely fashion, and what I heard about their builds was that they were looking mediocre, particularly for the development time which was being spent on them. That was in turn affecting our schedule; eventually we reached a point where we started to have to diverge from their design simply by virtue of the fact that we needed to keep working on *something*.
Increasingly, too, I got the impression that Lucasarts were unimpressed with FR's lack of progress. Rebellion were indeed planning to pitch to take over the project - those stories are true - but I got a very strong impression that FR's version was *already* dead in the water prior to that; given the timing of the cancellation announcement, I believe that Rebellion's pitch was more an attempt to save the game rather than to steal it. I'm biased, I admit, but it was so rapid a changeover that I have to surmise that Lucasarts' mind was already made up about the next-gen project.
Ultimately, Rebellion's Battlefront 3 became the PSP-only Elite Squadron. For a time we thought they were still going to go through with the PS2 version as well but at some point along the line that got canned in favour of presenting it as a side-game and a natural followon from Renegade Squadron.
My theory - and I must stress that this is entirely my own supposition - is that the vertical battlefield that was meant to be the lynchpin of the new Battlefront on next-gen was proving too ambitious to implement. I'm curious whether it was something that Lucasarts considered non-negotiable."
