Every week I search 'Half Life 3' in google, searching the last week of new internet pages with those words in them.
Every week is the same. Nothing.
I don't really know what is going on. They refuse to even mention it in interviews. I doubt they will be making episode three though. Its been almost five years since episode 2, that is far too long for an instalment of a game based on the same engine.
I think Half Life Three will be a full blown game, and we won't see it for a good few years yet.
This is how things work at Valve:
Everybody does whatever they want. If they have an idea, they go and find somebody who also thinks its a good idea and they do it. Then after developing it for howeverl ong they want, they might take it to Gabe Newell who gives them his opinion and then they go off and do what they want with it again. If nobody can be bothered to do something, it doesn't happen. Valve isn't your normal company, their staff can pretty much develop what they choose freely with no real leadership. If six people want to develop Portal 3 and only 2 want to develop HL3, then that is the end of that really.