After the release of D2 they began work on the inevitable sequel for several years before a falling out between Blizz North and the larger corporation led to most of the team leaving. Some of that team is now in Runic studio who are about to release Torchlight 2. The D3 that Blizz North was working on was scrapped and they began anew with the debacle of a game that would later gain notoriety and infamy as the only sequel worse than Duke Nukem Forever -- Diablo 3.
Umm... anyway, before Blizz North left Blizz-Activision-Vivendi, they had a good deal of work done on their version of D3 and it seems that some screen shots of the work was shown on kotaku a few months back (which I never saw until today). It seems the game was to be set mostly in the High Heavens and frankly it looks pretty f***ing great to me. Yes, I know it isn't the WOW-ish, cartoony, color explosion that D3 is, but I like it. And if released years ago when it would have come out (circa 2005 I would guess), it would probably not feel that dated.
Check it out (linking to a forbes article since I can't access kotaku at work): http://www.forbes.com/sites/erikkain/2012