Yes, Chris King stated a long time ago that they were working with a number of other firms on designing the perfect BB. This was whilst everyone was running square taper. They then dragged it out for a long time, before going very quiet. I suspect they jumped on the ISIS bandwagon, realised it was going to ruin their reputation, and kept the whole thing very quiet.
Some King HTII BB cups would be really good, but in honesty the Phil Wood bearing upgrade does the job with less pimp, and I don't think King would want to be reliant on the tolerances of Mr Shimano for the inner interface with the crank spindle.
Correct, they wanted to make a International standard drive for BB's, but when ISIS came, what they wanted, they noticed I guess (what you said) it wasn't what they wanted.
The quit the project.
I think you can still find info on the CK site.