The Questworlds project is still very much alive. It has undergone a number of writer changes since its inception and had a number of delays along the way. The current writing team has been working with Moon Design to get the project back on track. The last estimate from the Questworlds project coordinator was that they would get the next draft of the core rulebook done by December of 2006. Thus, the project is still alive, but probably around 6 months from true completion. I can't provide an accurate publication date until I have the final manuscript in hand.
Regards,
Rick Meints
Moon Design Publications
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