IGN has begun its own predictions for the coming year, and there's no surprise to see a mention of KOTOR III within the list. As we here at TFN also predicted, a third title in the RPG series is most likely, and according to the IGN crew its release date could be set between late 2006 and early 2007 for the next gen systems.
The game should feature more seamless interaction between NPCs and the lead character, as well as better, more economic interactions between party members. We(IGN) predict the combat system will go entirely realtime, as opposed to partially realtime (the way it was in KOTOR 1 and 2), and RPG fans will be able to enjoy more distinct shades of gray recognized by characters instead of the black and white distinctions made in the first two iterations of the series.
What has come as a surprise, however, is the hint at Mercenaries II. IGN has come to learn that a sequel between LucasArts and now long time partners Pandemic is well in the works and should see a 2006 release.
Neither the above have been officially confirmed from LucasArts themselves. Hopefully, they will be soon. Thanks to JediJones420 for the alert.