Now that Fable The Journey has been announced this is what Microsoft had to say about it:
“In using the Unreal Engine with its excellent tools for crafting cinematic in-game experiences, it allows our developers to focus on the quality and uniqueness of ‘Fable: The Journey,'” said Peter Molyneux, creative director of Lionhead Studios and Microsoft Game Studios Europe. “Already we are seeing a more beautiful, vivid and unique world full of dramatic moments and have crafted new, never seen before gameplay experiences.”
“The world of Albion has always been a beautiful place, and Lionhead embellishing it using the bells and whistles of Unreal Engine 3 makes it even more magical,” said Mark Rein, vice president of Epic Games. “Furthermore, Lionhead truly impresses with their proficiency for Kinect, with intuitive and natural feeling player interactions using voice and gesture controls in demonstrations we have seen firsthand. That gripping experience combined with stunning UE3 visuals truly make this is a world-class union of imagination and technology.”