I'm wondering if this is what has happened. Maybe they did have Episode 2 near completion last December, but then thought it would be more deserving a full release instead.

Another thought I had was Vista and DirectX 10. With last December being so close to the release of Windows Vista and the much improved Direct X 10 API maybe they decided it would be a better plan to spend some time upgrading the HalfLife 2 engine with some new DX10 features and then releasing Episode 2 at the end of the year when they hope many people will have upgraded to Vista and be able to take advantage of DX10 based gaming.