I have finally gotten a letter back from Steve, a person working at Sumo Digital. He wrote, and I copy and paste:
Thanks for your feedback!
ToeJam and Earl were characters we did want to include in Sega Superstars Tennis. Sega had looked into it, but it transpires that the rights to the characters actually belong to someone else.
I know Sega tried to resolve this so we could include them – but this wasn’t successful.
As such – though we again proposed their inclusion for Sonic and Sega All-Star Racing, it’s looking unlikely to happen at this stage.
Which is a shame, especially when you’ve pretty much covered our thoughts with your ideas, although we’d have them working together as a team in one car
Hopefully there will be some classic Sega characters that you do like in the final game though – keep an eye on Sega’s website as we’ve got more than a few to announce yet – and some classic ones included in that list!
So, that's how it stands. ToeJam and Earl can't be in, right?
If we work together, and demand we want them out of Sega, they'll have NO CHOICE but to put them in. And I'm not buying the whole "Owned by someone else" thing. ToeJam and Earl Productions (AKA JVP) is no more, and Sega of America is the TRUE owners of our funky heroes. So kellie, if you read this post, take note that I will not rest, I will not sleep for an instant, until I gurantee that ToeJam and Earl are in!
I whole-heartedly agree. As soon as TJ&E Productions went defunct, all rights to the series got absorbed by SEGA. And the first two games were able to be rereleased in numerous forms (the Jakks-Pacific TV plug-in, Nintendo's Virtual Console service, GameTap, etcetera). If ToeJam and Earl do not make it into the final build, can we please have them as downloadable content?
Seriously, Tj&E helped establish Sega in North America! They need more respect than that rodent, Sonic! I agree with NinMicroSega that they should be at least downloadable content. If they don't...*puts on Braveheart gear* I'll lead a mass riot.
Sega owns the publishing rights for the current games, but the IP of ToeJam and Earl belongs to Greg Johnson.
Regardless, TJ&E Productions has shut its door. Mark Voosanger works for Leap Frog and Greg Johnson is currently independent.
Here's a letter Greg sent to James Paterson of ManchesterOnline:
"Hi James. Sorry to say there are no further plans for TJ&E games. Our plan was to go directly on to other ports of the game after the Xbox version, and then on to sequels, but sales on the Xbox version were not so great and Sega pulled the plug on all further TJ&E development. We do have the rights to the IP and could conceivably do more in the future if we found someone interested in funding the development, but the team that built TJ&E3 was forced to disband. A studio in Hollywood did option the rights for movies and TV and there remains a small possibility that there could be a TJ&E movie. If that happens then I'd say chances of more games are pretty good. In any event it won't be soon. They don't even have a script yet."
So a new ToeJam and Earl game could be (re)made, but not without major funding.