Could the Grey skies be clearing in Hollywood? Sources say it looks as if they may be.

It was a close call, but Bill Zwecker of the Chicago Sun-Times, citing an inside source on the Grey's Anatomy production staff, reports that Isaiah Washington may have just barely saved himself from being fired over using a gay slur in reference to co-star T.R. Knight.

Since the incident, the embattled Grey's Anatomy star has ended his relationship with his longtime publicist, issued an apology, met with several leaders of the gay community and has hired a pair of damage control specialists, Allen Mayer and Kelly Mullens. Those consultants previously have helped Chicago's R. Kelly, Tommy Lee and Paula Poundstone when they faced serious image problems.

Even so, Grey's Anatomy star Kate Walsh told Extra at the Sundance Film Festival that the cast is still shaken by the incident.

"I really feel sad... I'm just saying my prayers... I don't know what is going to happen, I just trust that our show will deal with it in the way that they see fit," she said.

Then her co-star, Katherine Heigl (shown above, with Knight) chimed in.

"It's tense ... but I think it'll work out and I'm hopeful that it's handled properly," she said.

Steve Marsi is the Managing Editor of TV Fanatic. Follow him on Google+ or email him here.