I agree. The Planescape multiverse has so much great material that you don't need to do the man who cannot die concept to make an engaging story. As long as it isn't conventional in some way. Plus there's alot that could be visualized with modern technology. Many of the best parts of Torment in what I've played so far were things that weren't seen, but described.

I thought wizards of the coast "killed" off the planescape campaign, saying it was too complicated and unnecessarily complex. That was what I remember, anyway.

If that is the case we'll unlikely see any game set in the planescape universe.

Yeah, WOC killed the PS world, it's not supported anymore, mainly because it's not so stupid like most fantasy rpgs (or movies, or games, or anything else for that matter).
Anyway, PST2?
It could talk about the other characters in PST, like a closure and what happened to the characters after the story. And it could have TNO back, maybe first in visions to guide them, and than at the end a nice reunification plus romance with FFG or annah.
It would be nice and possible, but financially ti would be a disaster. Planescape simply isn't for the crowd.
Is it possible? NO. sorry, but anyone who see things real understands that. there were no decent Fallout3, no decent Longest Journey 2, there could not be a decent PST2. There is not enough people to buy it. There were not enough people to buy PST in the first place.

WotC didn't kill off Planescape exactly; Instead, 3e and 4e just used the planes of Planescape as part of the "default setting" of the game. It's Planescape, but instead of focusing on Sigil and The Outlands with the material planes being the places that you visit, it's reversed. The game assumes you're a material plane creature who only visits the outlands and the outer planes.

Naturally a ton of Planescape specific lore is lost in the process, but Sigil is still totally a thing in DnD.

An extremely vague outline of it is one of the sections of the SRD (no specific names or anything though): http://www.d20srd.org/indexes/planes.htm

Hmmm.. Torment 2?

Whilst there is a certain sense of closure with the recovery of the Nameless One's identity there is a certain sense of a possible story arc extending beyond his being dragged to serve in the blood wars.
I think I recall Fall from Grace saying she had place a mark on the nameless one through which she might track him.
Considering the way I leave the story at it's 'end' I feel the loyalty and in the case of Anna my companions would search him out.

The questions I think should be.. Can there be a sequel worthy of Torment? What form should it take?

There is certainly a story in their search for the Nameless One. Perhaps to find out where he is and help him find release or redemption they must delve into his history, his first lifetime? Would they by necessity split up and seek these answers across the planes?

Speaking of spiritual successors I feel the game that came closest was the add on to Neverwinter Nights 2, The Mask of the Betrayer.. whilst much of the action takes place on the prime material there are significant portions which take place outside it on one or more of the planes.
There was also at least a glimmer of that same sense of epic storytelling which gave rise to empathy with the characters.

I've seen a Chris Avellone interview somewhere (I cannot find it), who was the leader of the PST designer team. He said if they would do PST2, they would throw out the AD&D system from the game. He said it was in the way of their creativity many times.