At Square-Enix’s fiscal meeting they candidly mentioned the White Engine development is moving at a sluggish pace. However, they are not abandoning creating their in house engine. Since the engine is the backbone for Final Fantasy XIII it seems likely that the Playstation 3 game will be further delayed. Square-Enix did not mention a date for Final Fantasy XIII (maybe now 2009? edit: this date is just me speculating) or Dragon Quest IX, which was originally slated to come out this year.
It’s not all gloom for Square-Enix. Crisis Core: Final Fantasy VII sold quite well in Japan with 710,000 copies in the market. Itadaki Street DS was a hit with 410,000 copies sold, just to put that in perspective It’s a Wonderful World only sold 180,000 units.