Our own Monika Bartyzel brought us official word on the project in March 2007. She noted that Ponyo on the Cliff is an original work delving "into the lives of a 5-year-old boy named Sosuke, the image of whom will be visually modeled after Miyazaki's grandson, and a princess goldfish named Ponyo who is aching to become human." One of the things I love about Miyazaki's work is his ability to take you by the hand and lead you into unknown territories, so I really don't want to know more about the plot than that simple description.
As a point of comparison, Nausicaa.net compares the number of cuts in the storyboards (1,138) with those in Miyazaki's previous films, which may hint at Ponyo's eventual running time. The completion of the storyboards by Miyazaki is roughly equivalent to the completion of principal photography on a live action film, which means the film is well on its way. If you can read Japanese, you can perhaps get more information from the official Studio Ghibli production diary.
If the current, perhaps temporary, poster (pictured) represents the style of art that will be presented, it looks somewhat different than Miyazaki's previous films -- still wonderfully detailed, but with softer textures, almost as though the characters are merging more with the backgrounds. I'm very eager to see the finished film, which should hit screens in Japan later this year.