Just read an article about it today, it seems like they decided to rewind progress back to conceptualization, and Ubisoft Montreal is heading the game now. It's still in progress, at least.
I loved the Sands of Time and really enjoyed the whole trilogy. I'll admit that in the original combat became pretty stiff and repetitive at points, and hopefully they will improve it. As for having a means to carry water, while it would be cool, I liked having to rely on the rewind mechanic...