Through the Looking Glass has some information obtained from Looking Glass' Tim Stellmach about the possibility (or lack thereof) of Ultima Underworld 3 ever getting made...here's a quick quote:

Obviously we can't do Underworld 3 unless EA contracts with us to do it: it's their property. Just as obviously we could do a fantasy role-playing game without the Underworld brand. What we're actually planning I am, as usual, not at liberty to say, but we're keeping plenty busy.

Ultima Underworld 1 and 2, you may recall, were Warren Spector's projects while at Looking Glass (he now resides at ION Storm, where he's working on Deus Ex) and amongst the first first person games ever. In other LGlass news, Billy "shock the monkey" Wilson has posted two new screenshots from an alpha version of System Shock II over on that page of his that show off a bit of the standard HUD.