That's what I was inclined to think at first. But there are some signs.
1) Weinstine has apparently pulled the same stunt with Hoodwinked 2. Even though the film was well into production at the time. Apparently there was a lawsuit that was filed directly at Weinstine from directly blocking the film. At best, the rumor is true and it gets a who cares DVD release. And it should also be known, the BK kids meal toys were released last January.
2) Henson WANTS this film to be made. They want to relaunch the Fraggles so bad. The wave of random new merchandise, comics, and reruns on the Hub are clear evidence. They're clearly biding their time, but what it all comes down to is that they don't have the financial means to go it alone.
3) I've heard of scripts being held up for years, but this is ridiculous. Wanting an "edgier" film when everyone is SICK of phony edge by now, potentially putting the film's key group, Fraggle Fans with kids of their own, to try to get kids who don't care or know who the characters are who would be content in seeing anything else. Now, had this been a bigger studio that could stand the loss, it would be a "failure to launch" franchise, and it would be put in the closet with Rocky and Bullwinkle, Speed Racer, and Underdog. No major losses. This is a minor studio that prides itself on being supposedly independent. And even then, fiddling around with the material, even a script that was considered good 2 years ago before all this Wembling and foot dragging went into high gear Something tells me either they were trying to make this the film that saved the studio, or they're just running everyone on a wild goose chase until they finally run out of money.
4) they needed to find partners for a partnership for their partnership with Henson. While this is common practice, it did send out a warning flag.
5) Haven't seen or heard them do anything else lately.
So, unless there's some idiotic contractual thing that's holding the script hostage (my biggest concern), I think Henson NEEDS to consider other options. After all, they want to launch the characters again, they would stand to lose the most if the film doesn't happen.