From an interview posted on slashdot:
The good news on Sandman is that it's currently been taken out of the hands of the producers who've led it down the Road to Nowhere for the last 8 years. Currently Paul Levitz at DC Comics and I are trying to figure out what to do with it.
In a perfect world, a director who has the same kind of passion for the material that Peter Jackson had for LOTR, or Sam Raimi had for Spider-Man will come along and sweep everyone up in his wake.
I suspect that Joss Whedon's probably got his plate filled with his own projects.
Okay... A Gaiman/Whedon collaboration on a Sandman Film.
I'm going to go have a cigarette now.