I don't think they're working on it.
True, Telltale doesn't reveal too much about upcoming games, but Fables hasn't been nearly as secretive as King's Quest until now. We know for example that Mike Stemmle is handling Fables, he also posted in the dedicated forum as soon as the section was opened, more than a year ago.
No designer/writer/producer has ever posted anything about King's Quest.
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