If true its it would be the second time it fell. Watchmen is also counted as one of the many Terry Gilliam disasters that fell through.
One of the problems with doing a Watchmen in this day and age is its been done several times now. Will Smith's Hancock is the most blatent while the new Batman's "man in a bat suit" has a similar theme.
I think a problem with Watchmen is that no one will be familiar with it. Much of success of the recent superhero movies are fans familiarity not just with the characters but in the case of Hancock, that its a Will Smith vehicle.
To be honest with you, I would be really surprised if you could capture in a movie all the subtleties of the series. The articles at the end of the comics give so much insight into the situations, how do you capture that in a movie?