I've heard this before from two sources. While on Frank Zappa's site, I saw that Gail Zappa (Frank's widow) was going to answer questions if they were sent to an email address. Much to my surprise, she replied! The paragraph below is what I've learned:
Though Don Van Vliet might be dead, there seems to be a demand now for his music. Just a few weeks ago, the long lost Lick My Decals Off, Baby was released on iTunes, Amazon's MP3 Store, and other digital music services. Beefheart fans, prepare for more: According to Gail Zappa, the original Bat Chain Puller album will be released at some point this year. Some of you might be curious as to why I asked Gail. It turns out Frank Zappa, Beefheart's long-time buddy, was going to release the album on Zappa and Herb Cohen (Zappa's manager)'s DiscReet Records label in 1976. The album was recorded in 1976 and almost complete. However, the album was shelved when Beefheart's current label, Mercury, came into play (in short: being signed to two record labels at the same time equals conflict). When Beefheart was signed to Warner Bros. in 1978, the album was re-recorded with Beefheart's new Magic Band. That album was released in 1978 under the new title Shiny Beast (Bat Chain Puller). The original unreleased album has been leaked via bootlegs over the years but after asking Gail Zappa whether the original would be released, she said yes. She also said that Frank did not produce the original album (which I always thought). Gail also said in the e-mail that the liner notes are "fabulous and filled with stories about the magical Captain".
Well, this is pretty cool news! It's even cooler when you hear it from Gail Zappa herself! I'm definitely getting this when it comes out. You can expect a review up here when it comes out. Stay tuned!