Era insider insists it's still happening and it is less than a year away from release. We shall see though.Probably
Directors and other people frequently leave in the middle of projects. Cory left God of War 3 in the middle. SMS clearly continued making it.
They also left a few months ago to start a new studio. Apparently because they don't want to make these large AAA games, and prefer making more experimental titles. Its pretty obvious this is the direction that Sony Japan is going.
Though wasn't Stig always in charge of God of War 3? I mean, Jaffe was still working on God of War 3 before he left, but he wasn't directing, nor did he direct 2 (Despite being there).
I'm more sad at how Kat was done dirty and we'll never get another Gravity Rush.