The “restructuring” that SEGA has been undergoing for the past few years had finally taken its toll; almost right after Sonic 2 was finished, the available and relevant company contacts had been shaken up, creating a situation that was akin-enough to starting over.
This ultimately led to the development of the previously-mentioned prototype as a means to display seriousness. The prototype reached its current state just before E3 2014, where it was presented to a few relevant people. As can be inferred from various events that followed, the project was obviously not picked up. Silence was maintained on the issue until October, on the anniversary of the (complete) game’s release, when a presentation was made so that the work put into the prototype wouldn’t go to waste entirely.
This presentation gained a lot of attention, being mentioned by a few prominent gaming sites that brought it to a very broad audience. It’s reasonable to expect that this didn’t go unnoticed, but obviously, it did not cause the project to be picked up.
Over time, word has reached me from various sources that there is a legal issue of some sort regarding Sonic 3. Naturally, I don’t have any more solid information, since I’m not involved with the issue itself, however, it should come as no surprise because there had long been rumors of legal issues regarding some of the music that have reached the public from multiple sources. More recently, Cirocco Jones mentioned in early 2012 that there was a lawsuit “going on or about to go on” in relation to Sonic 3, and referred an interviewer to Bobby Brooks, who responded very negatively to being asked anything at all about it. Both quotes can be found here. Some people believe that this is in conflict with more recent releases of the game and the fact that they are still available, however, the last release of Sonic 3 (& Knuckles) was for Steam in 2011, the year immediately preceding the point at which Cirocco Jones mentioned actual, in-progress legal action, and about two years before the Sonic 1 remaster was begun. Also it’s not unreasonable to believe that whatever is happening doesn’t actually require SEGA to remove existing releases since we don’t know specifically what the dispute is and what terms may be in the works.
It’s not an absolute certainty that this is the one sole reason that the remaster project wasn’t picked up, but it’s a very distinct possibility, which is why I recommend preparing for a possible change in parts of the soundtrack, and making SEGA aware that this, being a necessary step to allow further releases of Sonic 3 due to the legal dispute, will not deter you from actually buying the game when it’s released. If you tell them “I want Sonic 3”, they read “I want Sonic 3, exactly like it was originally, no exceptions, and if it’s any different I actually won’t buy it”. You have to explicitly tell them “I want Sonic 3, and if it means that some of the disputed content has to be changed, that’s fine because the game will still be good and I will still buy it”. There is no guarantee that any current dispute will actually be resolved, so it should not be expected, but in the event that it is, it would be trivial to implement the disputed content in an existing remaster.