The project could be saved if the main site (and resource centre) for Jazz Jackrabbit didnt have a ban policy on a potentially legal game. You provide one link to it and boom its removed. (Yes, Im talking about J2o/JCF)

The only illegal part of it is the engine, but it can be changed with a few edits to make it a "Mod" for Unreal or Unreal Tournament. This way, it would be legal.

The only other things I can think of is maybe the names and charactors are copyrighted, but I hardly think Epic would care if you used them on a freely available mod for there own game (Unreal).

Its not like you see Rare sue people over Perfect Dark mods for UT, or the owners of the James Bond copyright for many James Bond mods for Unreal.

Either way, if you wanted to continue it, you will need some good coders, and a lot of community support.