Sir Ian McKellen has spoken out on his own site about his sadness that Peter Jackson won't be making The Hobbit film.

"I'm very sad as I should have relished revisiting middle Earth with Peter again as team-leader. It's hard to imagine any other director matching his achievement in Tolkien country...We will have to await developments but being an optimist I am hoping that New Line, MGM and Wingnut can settle outstanding problems so that the long expected 'Hobbit' is filmed sooner rather than later..."

So although he's sad that Jackson won't be involved, it does sound like it's steaming ahead regardless. Those were his words from his own site, and you can see the comments including the full text of Jackson's letter over there through Reuters.

It's interesting reading the full text though, it reads much less as a "I'm not doing it 'cause..." letter and more a "What can I do?" letter. The subtle difference is that if he was asked he may well come back and do it, don't you think? So if MGM pull rank on New Line (ooh, there's studio joke in there!) or New Line reconsider, we could still see this coming to Jackson's slate.