Valve has spent the better part of their time (since the release of Half-Life) developing a pretty sweet looking game engine. Now if Valve was able to develope a brand-spanking new game engine, and build a game with it, doesn't it make sense that 3DRealms is probably doing the same now too?
I mean, seven years to make a game is pretty extreme. In that time they were going to use an in-house engine (Prey, I believe), then Quake (for speeds sake, if I remember), then Quake 2 (for better functionality or something), then Unreal (for the vast open areas), then UT (for functionality again), I think they have finally gone full circle and realized that their best bet was to develop an engine on their own... probably Prey 2 or something...
again, just speculating for the fun of it!