I'm going to kep posting this post until everyone reads it.
I'm going to lay the rumors to rest here.
The layoffs were simply because Torunament of Legends had completed production and all the staff that could be moved to other projects were moved and the remaining redudant staff were cut. This happens to every studio out there. 80% of all layoffs you ever read about at a studio are for this exact reason. It's also why studios are built near each other...so it's easy for one studio to quickly grabbed just axed talent. A lot of people in the industry will drift between studios over the years as projects come to completion.
And The Grinder remains on Wii as the FPS we all saw it as. They didn't show anything new at E3 for 3 reasons.
1. It's not coming out before next E3 already rolls around.
2. They wanted to focus on near release projects like Conduit 2.
3. It doesn't have a publisher yet and HVS used the Sega booth to showcase their products. So they couldn't show off The Grinder on the show floor even if they wanted to.