This project is as good as dead, atleast for now. It was Bloomys pet project to entice the Olympics, which are a dead deal now.
However, I would still love to see this line extended(though I don't see it as a top priority. SAS is THE TOP priority, no questions asked).
I would say extend the 7 as planned, then further down the west side highway and tie it in with the new Fulton Street Transit Center. Include stops at the NY Waterway ferry terminal, Chelsea Piers, and Christopher Street.
IMO, they should be using the high line for this one. It's the perfect candidate for a subway extension.