From what I've read on gaf, their is some credibility to this rumor. However, an announcement around GDC implies a 2010 release, which is not a very good idea, imo.
It would imply a dev cycle just shy of two years for the game. It'll mean a shorter dev cycle than even Resistance 2. Guerrilla aren't Naughty Dog, and I don't think that's enough time to pump out a game worthy of being called Killzone 3. Inifinity Ward are the only guys I can think of that can pump out a truly awesome FPS in only two years. Even Bungie take three years to release a flagship Halo.
I hope they don't rush this game just to get it out by the holidays. Of course, Sony has shown they aren't afraid of delays by any means, so I doubt that'll be the case.