On Feb 8th Sega's Associate Brand Manager, Ken Balough announced Sonic 4 Episode II is in early development. Ken Balough later said:

"[....] I can tell you you are going to see new zones that look really cool.

Re-hash kind of depends on how you look at the topography. I mean; we've gone to a lot of areas - Underground mines in Sonic 2, Deserts, Lush green hills, Jungle, Cities, etc.

But yeah - the idea is to introduce new zones with things you haven't seen."

Ken also admitted that Sonic 4: Episode 1 had aspects that "could have been done better"

Ken also assured that "you definitely wont have to wait years and years a la Duke Nukem Forever."

 
 
Tails was also hinted to be in the game, thanks to Aaron Webber stating:

 
 "Aristotle, often cited among the Greeks who wrote about Hedgehogs and their powerful wind-sensing abilities, was himself later categorized among writers and thinkers in a comparison that any Sonic fan might find quite interesting. Rumor has it, in fact, that there are two styles of science: compared as either objective or abstract. Find the false line within this paragraph itself, and you may find hidden answers of your own."

 
Which, when putting the clues together, refers to the essay "The Hedgehog and The Fox"

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What we now so far:

-It's in early development

-The game promises new "cool" zones that we've never seen before

-Tails is said to be in it

-It's supposed to improve on Sonic 4 Episode 1's faults

-We won't have to wait forever until it's out

Sources:

http://www.tssznews.com/2011/02/25/sonic-4-episode-ii-now-in-early-development-says-ken-balough/

http://www.tssznews.com/2011/02/03/sega-celebrates-hedgehog-day-hints-at-tails-in-sonic-4-episode-2/

http://scrawlfx.com/2011/02/sega-sonic-4-episode-2-in-development-will-improve-on-episode-1 
http://www.destructoid.com/sonic-4-episode-2-in-early-development-will-fix-things-195253.phtml    

The fucking physics.  The physics of the game are all wrong.  Thats why sonic 4 sucks ass.

If they just make it feel like a high-quality level and HD graphics pack for Sonic 2, I would keep purchasing copies of the game until I ran out of money.

They sort of got their whole episodic release dates wrong. Plus the first episode sort of sucks

Does anyone care?  Sonic 4 was the absolute last chance to make a good Sonic game.. and it sucked.

I didn't really like episode 1 all that much, but I'm willing to give this a shot.

The second episode is in "early development"? Did they learn about episodic games from Valve?

" The second episode is in "early development"? Did they learn about episodic games from Valve? "

" @LordAndrew said:

" The second episode is in "early development"? Did they learn about episodic games from Valve? "

When was the last time that Sega did anything right where Sonic was concerned? "

Wow this is great to hear! I love Sonic 4: Episode 1, and absolutely can't wait for Episode 2. I can see great things from this game. Great things.

I thought Episode 1 was a lazy, poorly designed, totally rehashed piece of shit, so I guess I won't be buying Episode 2.

Suprised that the 2nd episode isn't closer to being done as they'd have most of the stuff borrowed from episode 1 along with it just being yet another attempt to redo sonic 1 & letting the diehard fans (aka the majority people still interested in the franchise) disappointed yet again. Maybe if you add up all the sonic episodes it might add up to a whole game that you'll probably pay too much for.

" I thought Episode 1 was a lazy, poorly designed, totally rehashed piece of shit, so I guess I won't be buying Episode 2. "

" @IBurningStar said:

" I thought Episode 1 was a lazy, poorly designed, totally rehashed piece of shit, so I guess I won't be buying Episode 2. "

Really? Sure the levels have either been borrowed, or just completely re-used, but that's the fun in the game to me. It adds a modern twist, to the good old classic levels, that we all know and love. I think that's what really sold the game for me. "