Story and transcript on Kotaku:
I don't think it's ridiculous. Episode 1 sold poorly, key members left Ritual, and no one from Ritual has made an upfront statement that "yes, Sin Episode 2 is going to happen" to silence these rumors. That's really the damning piece of evidence; I can understand them withholding details/media/whatever about the game, but it seems they won't even confirm that they're making it and there's no reason to withold that.
I mean read Ken Harward's statement after the depatures:
"I'm really looking forward to helping guide Ritual," said Ken. "2007 looks to be a great year as we finish up our current projects and start some exciting new ones. I'm excited to have the opportunity to expand my leadership role within the company, and I'm flattered by the huge amount of support everyone in the tribe has shown. There's a ton of positive energy in the halls."
"current projects", why so ambiguous? The lack of any specific mention of Sin Episodes 2 is rather conspicuous. If it was going to happen, no doubt he'd say something like "and we're really excited about Episode 2" to put all this speculation to rest.
It's not going to happen people. I'm not anti-Ritual, in fact I'd love if I had to eat my words in a month or two, but I am rational and it's hard to draw any other conclusion from the evidence at hand.