The latest I read is that the fight is still on. Apparently, the Nevada Athletic Commission has agreed to sanction the fight after watching Dana sparring and realizing that he is a good boxer. The only other issue to be resolved is that Tito and Dana can not be too far apart in weight, so they will have to fight at some catch weight. Also, from what I know, the fight will not be shown live, but will be taped and then shown in edited form on UFC.com.
The editing part is a smart business decision, because in case Dana would knock Tito out, it wouldn't look good for the company that one of their top fighters got his ass kicked by a suit wearing business man and, since Dana is a former amateur boxer, it certainly is possible. On the other hand, we will not be able to see the actual fight, but only what the UFC wants us to see.
In my opinion this fight is a bad idea. It will cause comparisons to WWE's McMahon vs Steve Austin feuds and some people will probably start wondering if some of the UFC fights aren't predetermined like the ones in WWE.