Not much has happened since then, other than a lot of chatter on an email discussion list, and the small acquisition of Grub, a distributed web crawling company, from Looksmart. The official site for Wikia Search is here.
But the promise has been for Wikia Search to launch this year, and it appears to be on track. Yesterday Matthew Buckland reported that Wales showed “some of the first screen shots” of the new project (the first, as far as I know).
The Man v. Machine debate as it applies to search is about to begin. By this time next year we should have lots of data on the performance of Wikia Search, as well as the new startup Mahalo which is also in this space. Until then, we can spend our time speculating and, I guess, continuing to live with Google for our search needs.