While the show's official rep declines comments on the details of actors' contracts, a source close to the show says it's true that Knight is under contract to return - full-time.
The blue hair, however, most likely won't be making an appearance on screen. Although it would go well with the scrubs.
T.R. Knight, along with some of his co-stars, have been the subject of recent contract discussions and rumors in what became a rather tumultuous Season 3 (and off-season) for the ABC hit medical drama.
As for his character, George O'Malley, he still has to deal with flunking his exam at the end of last season, thanks to a certain woman... or several. How will he stay at Seattle Grace? That remains to be seen. But T.R. Knight will be front and center when the show returns September 27.