"A good chunk of the BioShock team did not want to work with Ken [Levine] ever again, and 2K definitely understood the sentiment and let them set up a new studio so that they can make Bioshock 2, leaving Ken with Project X. A good chunk of the other senior 2K Boston people who were sick of Ken but didn't move to San Francisco ended up scattering to other AAA developers instead. In Quincy, they're essentially rebuilding a team from almost scratch again."
So claims generally reliable industry insider Surfer Girl, based on her own insider tip-off. 'Project X', incidentally, is the upcoming X-COM remake, a game I'm personally desperate to hear more details of. But the Bioshock stuff's depressing if true. While CGI videos of people getting killed in horrible ways sold Bioshock to a mass audience, and clearly the entire Irrational team were responsible for the general excellence of the finished game, Levine and his high falutin' talk played a huge part in convincing more cerebral gamers that this was the event of the year for them.
With no confirmation or real information beyond Surfer Girl's short post, it's barely even worth speculating what happened within the ranks of the-artists-formerly-known-as-Irrational at this point - though I can't help but wonder whether it's in any way related to their hind being permanently branded with the 2K name. Plus, there's a long tradition of developers who carry a whiff of the auteur about them to soon pick up an additional trailing odour of Being A Bit Of A Dick. I suspect it's rarely deserved (certainly, Levine seemed lovely on the one occasion I met him, but then again he was promoting a game to me rather than telling me to make one for him), but I can well imagine that when a large team of people works on a game, only for just one name to become reknowned for it, there can be some discontent.
Difficult to work with or not, he was associated strongly and positively enough with Bioshock that I wouldn't be enormously surprised if 2K are pondering whether to pull a Sid Meier with him. "Ken Levine's X-COM", anyone?
Oh, and Surfer Girl throws this into her comments thread later: "Very, very, very little work has been done thus far on a sequel, so go to the official BioShock forums with your feature requests." It's also worth noting that there's still no sign of the Bioshock 1 patch and widescreen fix promised back in August.