This is how it went:
1. Fred approached 3DR and Gearbox with some images of quick Duke 3D level mockups in UE3 wanting to do a Duke 3D remake.
2. They let him do it, and give him a contract that will eventually allow them to release it as a free game.
3. Everyone gets hyped about it and stuff.
4. Turns out that that the contract allows Interceptor to "make" the game but not "release" it. Interceptor stops making it since what's the point?
5. After Interceptor released ROTT 2013, an official commercial game, Gearbox says Interceptor always had the right to release the game.
Some further points:
Gearbox never intended for DNF to have mod tools, therefore to keep the Duke modding fanbase happy, this alternate UE3 fully moddable Duke game was going to be released (Reloaded).
Gearbox never actually intended for Reloaded to get released, and IIRC there was actually a pulled comment from Fred to that affect from one of the later meetings. Probably on the off-chance that it would have made DNF look bad (which really isn't that hard).
TX the Duke4.net forum moderator and head eduke developer came across a leaked version of the game and said it was very unfinished for the amount of time it'd been in development, and had a few noob issues.
Gearbox only claimed that Interceptor could release the game after Interceptor became a commercial company, because Gearbox knew as a fact that no company in their right mind would devote resources to making a full-sized, free, commerical quality game. So Gearbox are being dicks on that one.
Considering the extreme bugginess and several poor design choices (horrible, horrible horrible horrible instadeth platforming, and "relatively" linear level design mostly resulting from the original checkpoint system, amongst other noobish things), Reloaded quite simply wouldn't have been all that good. At that point interceptor had no game making experience, weren't getting paid to do it, and were working on it in their free time. Considering how certain aspects of ROTT 2013, (an official game they were getting paid to do full time) turned out, Duke Reloaded probably would have been worse in those aspects. Not to mention that one guy who actually worked on the team stated that there were people working on it who had never played Duke 3D before, and were making design decisions that were distinctively un-Duke 3D-like.
Now I'm not saying ROTT 2013 is a particularly bad game, especially for the price (it's fun in small doses), but you get my point.
The fact remains that Duke Reloaded is never, ever, ever Ever ever going to come out. Forget about it. And it wouldn't have been that flash anyway.
If you want a modern, flashy Duke Nukem Forever, then look no further than Duke Nukem Eternity, an extremely high quality mod using all the latest features of eduke32:
http://www.moddb.com/mods/duke-nukem-eternity
If you're after that classic 1998-style DNF, then the (also extremely high quality) Duke Nukem Forever 2013 is the closest you're going to get:
http://www.moddb.com/mods/duke-nukem-forever
Long live Duke 3D and EDuke32.