I doubt it is in development.
They can just keep adding content with expansions. They could even update the graphics with an expansion. Current player do not want to start their character over again, they just want more content.
When Everquest 2 came out, most people failed to switch. They just recently released an Everquest 1 expansion recently even though Everquest 2 was released over 3 years ago. Asherson's call 2 was released and shut down after just a few years, Asheron's call 1 is still there.
What would you need a sequel for, when you can just keep cashing in on expansions. An expansion would make the people who have spent countless hundreds of hours upset that then need to start over with a new game.
If they saw the need to make even more obscene amounts of money, they should start working on the World of Starcraft MMO.
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