They are not dead at all: I got this from the staff:
Yes the game is still alive but the development is partly on hold due to another big project we want to finish first. The project we are currently working on is a Freelancer mod which is partly based on Starlancer.
Many elements of that mod will be used for the Starlancer game as both use the same ship models. So its more a kind of shared development of the Starlancer game and the Freelancer mod.
We managed to increase the texture detail of those ships and their final look which will be of great benifit for the Starlancer game.
But like I already said the release of the Freelancer mod has highest priority at the moment and hopefully will be done within the next 2 months. Then the work on the Starlancer game will restart with the resources from the Freelancer mod. I guess this will speed up the development of this new game.
In short, excellent news. The only thing I'll probably wish for at the moment would be to have news on that guy trying a halo space combat conversion. This was a very good plan too. Hopefully it'll turn up again one day.