What happened to him after that, no one really knows. His character never returned.
In a recent interview, James revealed that the producers of the show have been interested in bringing him back, but his schedule just hasn't allowed for that to happen. The man's been busy, stating...
“It remains a possibility I could return. The character I played is away for a long time, so it’s kind of up to them whether I stay away or if I come back. There have been a few back and forth conversations and they check up on me every now and then. I had a fantastic time working on the pilot with Andy Lincoln and especially Frank Darabont. He’s somebody that I’d directorially always wanted to work with and I’m glad I got the opportunity... There’s a possibility I might go back. It just depends on timing-wise if I’m free. At least one of the times they contacted me about it, I was busy doing something else.”
So there you have it. We might be seeing him back as Morgan Jones next season; the cast and crew did tease that there are surprise characters in season 3, and we obviously don't know who they are (that's why it's a surprise).
What we do know is that Michonne, to be played by Danai Gurira, will ne right in the thick of things when season 3 rolls around later this year. And T-Dogg (IronE Singleton) will be "unleashed," as producers have suggested. What about introducing Tyreese? That we don't know.
Season 2 ended with a bang, in an episode that was directed by Ernest Dickerson, who is also directing the season 3 premiere epiosde!