Ultimately, the project was canned, after leaked footage suggested Sega struggled to translate Sonic's running and jumping into a 3D environment, and the Sega top brass expressed disappointment with the project's direction. It wasn't until Sonic Adventure was released for the Dreamcast that the franchise finally went fully 3D.
However, Kotaku reports that some enterprising types, with far too much time on their hands, are now working on resurrecting the game for the PC.
You can find out more details here - and here's the team's announcement video:
"Coooollllll!!!! I don't know about you, but I can't wait to play a game that was never considered good enough to release 18 years ago!?!!! I'm sure time has been kind to this one!!!!?!!!! Forget survival of the fittest - this is survival of the FASTEST!!!!!??????!! Plus we all know that every Sonic game has been a solid-gold treat, so this is bound to be worth thirty seconds of your time!!!?!!!!!"