What if a new Jazz was developed with little to no funding in mind, and then shown to Epic for approval? Somewhat in a way WTG did, but then it would be a fan project turned official thanks to UDK. I mean, if people want to commercially distribute a non-profit project created with UDK, they'd have to pay a hefty licensing fee as well.

In terms of licensing we may have an advantage, Epic holds the rights to Unreal Engine AND Jazz Jackrabbit.