But, as I said, I believe that that game has been canceled.
I wouldn't be so sure. The Alucard game was announced AFTER the first Lords of Shadow teaser, before LoS was even known to the public as Castlevania. Besides, the japanese Castlevania team must be up to something as we speak, right? I strongly believe it's a big project - not a DS one - and it's also probably at least 2 years away. So, they don't want to interfer with the release of LoS at this point. Also, IGA was not happy with Konami revealing the "Alucardvania". Why is that? Maybe because the game was far from being finished.
Maybe Konami wanted IGA to make SotN 2, but IGA said "Jesus christ I need A LOT of time for that, I want it to be perfect!". And so Konami thought to themselves: "Hey, let's make everybody forget about the SotN-sequel for now, shall we? It's not gonna be finished until 2012 anyway. And LoS is the perfect distraction! But let's just wait and see if Mercury Steam actually delivers something worthy of the Castlevania name first."
They probably only showed it because of the uncertainty surrounding LoS being turned into a fullfledged Castlevania or not. At the time of the Alucard teaser, maybe LoS wasn't shaping up too well, so Konami felt desperate to show something. IGA wasn't happy about this because he felt pressure to finish the game earlier than expected. So Konami sent Hideo Kojima to Spain. VOILA!