I can assure you that it's not their fulltime job anymore. Without going to details one of the developers admited that nowdays primary scource of incomme is by working on a bakery.
I am sure that Scawen works on the tyre physics, but if he is able to finish them, I am not sure anymore.
We allways hear that Eric is and has been working on stuff, but little has been shown on that front since Eric refuses to show pictures or stuff of his work before he is satisfied with it, and as far as I know that means when he has completed it.
Wheter or not he has LFS as primary anymore I do not know, but my best guess is that the 3 of them have other types of work, or they would not be able to feed their families.
If I belive if S3 is going to be released? - Not sure anymore to be honest, it just seems as Scawen has taken a little too big task, and now he is in a state where he struggles to progress but at same time canot release anything because it would let down the community.
The fact is however, no matter how good the tyre physics are, by the time they are relased the game will be 10+ years old, and even the hardest of the fanboys must admit the techology has gone forward. Now there are so many games to pick from, with excelent graphics and improving physics. And going online in LFS thesedays just makes me sad, there is 1-2 racing servers online with people on them, rest is either demo og cruise. In fact the best races I'v had this last year was on demo servers with demo racers, and I think that shows that this game is not doing well.
But who knows, maybe S3 is released this year, maybe the physics are spot on and in top of the field, but as time passes I think our immagination is making LFS bigger and better / the expectation for what's to come far better than what we actually will get. By the time it will be released there most likely will be other games that servers the same entertaining as LFS, alltho they might not have the same good feel as LFS. The physics alone is not going to keep this game continuing, the community will, but as long as the developers shut down their community - well then things starts to look bleak.
But again, I might be wrong, I might not, time will tell, but something must soon happend. 2008 was long ago....