EA know exactly what they're doing, you just seem to have misunderstood quite a lot of the history of OSI/EA.
First, Garriot certainly did not fund U9 himself, EA grudgingly made the game because Garriot kept bugging them to.
Anyway, they decided 6 months after UO came out that they should start work on UO2 because the first was a success. After 3 years though, the game was still a year from launch, was fundamentally flawed in a couple of key areas, and even if it did ever get finished, it was going to cannabalise the now very successful UO (Garriot, Starr Long etc. all tried to discourage UO2 from being started for this very reason). So EA canned it.
However, they knew that they could not compete on the market with UO forever, because of the bad image it still had from the early days and the unimpressive graphics. So they decided to start making a "UO2.0" (not a sequel, but rather a huuuge upgrade). There were some leaks about this back in Summer 2001.
Recently it was discovered that "UO2.0" is really known as "Ultima X: Odyssey". This UX:O game, while a free-standing MMORPG in its own right, is actually a massive upgrade to the Ultima Online service as a whole.
The current thinking on various fan-sites is that it is an online game that takes place in the world after the events of Ultima Ascension (this is a neat way for the developers to create a brand new, fully 3D version of Britannia whilst keeping the fiction of UO consistant).
There are also rumours that characters from UO can be brought forth into the new game, but still nothing official on that yet. Just wait 3 weeks, there's going to be massive amounts of information on it then.