UPDATE: 20th CENTURY FOX HAS DECLARED THIS UNTRUE! Too bad, sounded like a cool idea!
If rumors coming from the folks at Latino Review are true, 66 year old action icon Arnold Schwarzenegger will be finally working with his Terminator/True Lies director James Cameron again in Avatar 2. The rumors claim Arnie will be playing the villain in the sequel who is a general. As Cameron plans 3 more Avatar films, it is not known whether this is a recurring role or just a part in this particular installment. At this point this is RUMOR only and there has been no official announcements made.
source: Latino Review