Given it's now been literally years since the last news of a 3rd Blair Witch film emerged it's a pretty safe bet to say it has been cancelled.
That said the last thing we heard was that it was filmed and sent off for processing.
That can't be true can it though? There was no real news of it being filmed. Maybe it was a presentation?
Haxan haven't said anything since 2004 and they have posted some updates on the site recently. So I think we're going with the Lions Gate rejected what they had done so far and it's now offically dead.