At the time, october-november 2004, LA was in financial trouble and had to cut back on alot different projects such as KotOR 3.
But, KotOR sold 2 million and KotOR 2 sold 1.5 million, so there shouldn't be any financial reason of NOT making a third one of the series. Revenge of the Sith, Lego Star Wars, Battlefront and merceneries were all >1 million sellers, so LA shouldn't be in a financial trouble right now either.
What i am trying to say is, i have no clue on why KotOR 3 haven't been announced