In the latest Game Developer magazine, there is a pretty good post mortem of Stranglehold , and interestingly one of the bullet points under "what went wrong" is Unreal Engine 3.
"Unreal Worked really well in giving art a big head start, but keeping up with the code drops from Epic took up lots of time. We did a big merge of all Epic's new changes into our code base about once every three months. This was a difficult and error-prone task, and at times it took the whole team down for weeks while we worked out all the issues. We lost probably two months of time on the project due to completing these merges. In the end using Unreal Engine 3 was still a win, but we should have done merges less often, and found ways to insulate our content creation teams from the downtime."