Although it's still yet to be officially confirmed, it does seem that way. See here:
Brutal Legend was originally being published by Sierra Entertainment, which was owned by Vivendi Games. In 2008, Vivendi Games and Activision ó another publisher ó merged to form a new company: Activision Blizzard. Sierra Entertainment thus became a subsidary of Activision Blizzard, and in the process a lot of games across the entire new company were shelved.
All reports indicate that Brutal Legend was one of these games, and itís not clear what exactly the situation is at the moment. An interview with Tim Schafer in August 2008 revealed that Brutal Legend development is continuing as normal, and that Double Fine may be actively re-pitching the game to new investors.
It's worth bearing in mind that unlike a lot of the titles scrapped by Activision Blizzard, Double Fine fully own the rights to Brutal Legend. The publisher can only pull out; they can't actually cancel
It pays to never take anything for granted, but I'll be very surprised if Double Fine can't find a new partner. At the very worst, they've got services like Steam
to fall back on.
As a general FYI, development of the game is still ongoing and the official word from Schafer is that "Brutal Legend is fine".