I think it is still independently developed, but parts of it are included in AV1. Thea idea of lapped transforms in video is really interesting and AV1 isn't using it as far as I know. So hopefully Daala will continue on its own.
I agree with you on the whole lapped transforms concept. It looked quite promising, but they ran into issue. IIRC it was problems with the overlap between differing block sizes. My instinct tells me there is a way to overcome those issues but it may be a while before anyone finds it.
UPDATE: Looking at the mailing list archive, there isn't any activity there: http://lists.xiph.org/pipermail/daala/
The code repo is also pretty quiet: https://git.xiph.org/?p=daala.git;a=shortlog