It's happening, it's not, it is, it..might be. In this blog entry from Neil Gaiman the author sounds less sure about the prospect of a Sandman TV show than DC chief Geoff Johns did. But confirms that it is something are trying to get off the ground at least..
I saw a bunch of press about whether there is or isn't a Sandman TV series: as far as I know, nobody has actually optioned SANDMAN as a TV series from DC Comics, who own it. Eric Kripke (of Supernatural fame) pitched his approach to DC and to me last year, and we liked it and we liked him, but it didn't feel quite right at that point, so we passed. I think that this year the people at DC Comics (and me) will talk to a lot of people who want to make a Sandman TV series, and if we find the perfect person with the perfect way of treating the material, it'll happen. And otherwise it won't.
So now we know why things didn't take off with Kripke anyway. Lets just hope they DO find that perfect person and this doesn't end up in development Hell again.