You guys basically have it right.
SITH2 is a new engine that runs and requires JK resources to operate. It's got several swank things to improve it, but mostly, the goal is to achieve a stable netcode. Larger texture sizes, higher model detail rendering, and several other things will make Sith2 a superior engine to the Sith engine by Lucasarts.
JKR is a graphical update to all aspects of JK, including model textures, [Zully is independantly making all level textures, so that's NEITHER project, but more Sith2 than us] models, all 3DOs, model animations, and all MP levels. Efforts to reconstruct the single player maps is a possibility, but not at all our goal at this point.
JKR WILL be released for JK, but it's uncertain how it'll run. Specifically, JKR is designed with Sith2 in mind. Sith2 will also be released with JKR as it's non-JK resources. The goal is to [possibly] make Sith2 standalone from JK, requiring NONE of it's resources, thus making a whole new stand alone game. We haven't begun discussing how to dodge lawyers, but we should be able to get a few headshots before we go down.
JediKirby [Director of JKR, if you didn't know.]
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