Source: http://www.blackwidowgames.com/Sorry that They Hunger: Lost Souls release is taking so long, but the entire development team has been working really hard on additional content and further improvements based on feedbacks from internal testings. Our ongoing "crunch mode" has not allowed much time for interviews or publicity.
Unfortunately, a few major web sites have interpreted our lack of news as a sign that the project was cancelled, which could not be any further from the truth. We are currently in contact with them to rectify this information. After investing so much time and effort on this project, it would make no sense to cancel it at the final stages of development, but it also wouldn't make sense to rush it out of the door until we can be sure you will fully enjoy it!
We will not be announcing an official release date until the game is close to release. In the meantime, we will continue focusing exclusively on finishing this game. Thus if you don't hear from us too often, it only means we are still busy improving the game.
I found out that this isn't going to be a modification to Half-Life 2, but rather a full game made on the Source engine. With that said, I have a feeling that we're going to have to pay for it.