Blunt was pegged to play Natasha Romanov (aka "The Black Widow"), until 20th Century Fox decided to exercise their option and have Blunt star alongside Jack Black in Gulliver’s Travels. This lead to a scheduling conflict that ultimately lost Blunt the role in Iron Man 2.
The last we heard, Fox and Marvel were trying to work out their timelines so that Blunt could appear in both films, and denying the fact that Blunt was, of course, no longer the Black Widow. Scarlett Johansson is still rumored to be in talks to replace Blunt and Dollhouse actress, Eliza Dushku made pleas to the public to help support her in her quest to take over as the Black Widow last week.
Favreau neither confirmed nor denied these reports, but let's hope Marvel doesn't make either one of these casting mistakes.
Speaking of villain casting questions, professional wrestler and American Gladiator Matt Morgan announced on Hot Talk 1280 WHTK that he's in talks to play a bad guy in the up and coming Iron Man sequel. Who knows what this means exactly, as Morgan did not elaborate on the role in question. Let's hope he's not the choice to replace the character Mickey Rourke was in talks to play.
In regards to Favreau commenting on Mickey Rourke joining the cast, Superherohype reported:
The only thing he said about Mickey Rourke is that he "isn't officially cast but that he is a fan."
Basically, the current casting for Iron Man 2 is up in the air, but rest assured that Robert Downey Jr. will be reprising his role as Tony Stark, Iron Man himself. Other than that, I guess we'll have to wait and see if Marvel goes ahead and ruins the film with poor casting choices like Scarlett Johansson.
Source: The Playlist