I've found a couple of articles supporting this, and I hope its's 100% go, but I won't be comforted until I hear it from Gilliam himself. The Dreams Fanzine has some message board posts about it but nothing solid. I wonder who'll the'll get to play Quixote? Jean Rochefort seemed perfect for it at the time they were first making it, but he's a good deal older now and his health was poor at the time.
I can't wait to see The Imaginarium of Dr. Parnassus
, though. About 21:26 into this clip from a Cannes ceremony-thing there's a brief scene from it (actually, check it out at the 20:39 mark for some film using wacky stop-motion animated farm animal toys!):http://festival-cannes.direct.canalplus.fr/video/ceremonie-d-ouverture