According to the jobs listings that I looked at a few months ago, there is no department within Microsoft that is currently assigned to working on Trident (the Windows IE rendering engine), and all development on Tasman (the Mac IE rendering engine) has been stopped (that last point was publicly announced).
Microsoft have also publicly started that they could make no improvements to IE that did not involve OS upgrades. Since they recently released a preview of their post-Eolas-patent IE, which consisted of only changes to the rendering engine, and did so without releasing a whole new OS, it can be inferred that they are either lying, or are not going to be changing the rendering engine.
Given their recent huge emphasis on Avalon, which is a technology that reimplements HTML, CSS, DOM, XML Namespaces, SVG, SMIL, ECMAScript, XUL, and XBL using their own proprietary markup languages, I don't see how it would benefit them to also have a team working on improvements to IE's rendering engine.
Note that in their recent Longhorn preview, the Web browser was a variant of IE with only three changes: pop-up blocking, a download manager, and an extensions manager. The rendering engine itself was, as far as I am aware, unchanged from IE6. (Except it now support Avalon/XAML/.NET as well.)
Microsoft have also been observed dramatically reducing their W3C commitments. Where they are still active, I am not aware of any claims that they will implement new W3C standards (or even old ones being updated, such as CSS2.1). This is in contrast to their previous behaviour, which consisted of loud claims (within the W3C at least) of upcoming products with strong support for the standard-du-jour.
Finally, of the people I know within Microsoft, none have told me of any work on Trident. The only recent Web browser related work I have heard of within Microsoft is related to their MSN TV product, which, if what I have been told is correct, is not itself a very high priority anyway.
Now, it is of course possible that Microsoft are simply being very tight-lipped about this. But I find this unlikely, given how widely they circulated the rumours that they were working on fixing IE's standards support in WinIE6 three years ago.