Some details from ICv2:
[The film is] the story of Sasuke, a five-year-old boy, and a Princess Goldfish (Ponyo) that wants to become human. Production on the film began last October and it is slated to be released in the summer of 2008. Miyazaki is creating the storyboards himself in watercolors and it is thought that the feature will be produced in the traditional hand-drawn 2-D manner.It's the hand-drawn news that I love to hear. Miyazaki has used computer animation in some of his past films; and while the computer renderings look good, it is the hand-drawn work that always impresses me when watching a Miyazaki movie. The hand-drawn work seems richer and more detailed. Studio Ghibli never fails to impress and leave me in awe with what they are able to accomplish with traditional hand-drawn animation.
No word as to when it will be released.