The fact that you even asked this is pathetic, but here's the main reason: people are still dying in this war. I trust you understand why selling a game based on a war in which people are still dying is a bad idea.
I think it's worse that it's made to sell to the side that started the war, effectively killed a few hundred thousand people and displaced millions, destroyed the country and is trying to rob its natural resources, presented from their pov and quite probably glorifying the military again. The "people still dying" thing would be a good argument if this was an art project in some Brasilian university...the argument's more like "you're still killing people and now you're making money off turning it into entertainment".
Gamasutra reports Atomic was caught by surprise by Konami dropping the title.
"We were informed on Thursday night that Konami had decided to pull out of Six Days in Fallujah. This caught us by surprise. Development of the game had been progressing very well and on schedule. We would very much like the opportunity to complete the game."
I must say that the idea for this game isn't a great one in my opinion, but Konami not telling their devs that it's over, yet licking the journalistic balls to appear reasonable is kind of sickening in itself.