The open world aspect wasn't totally out of their field of expertise (due to Ōkami), but I suspect the online multiplayer aspect is what sabotaged things. That shit is time-consuming, expensive, can be an engineering nightmare, and honestly doesn't sound like something Kamiya would be interesting in doing in the first place.
It was there all along due to the pedigree, we were just never shown anything truly substantial or jaw-dropping.
MS joining up with PG for a mega-budget open world game is (literally) a big deal even if you aren't interested, and it being cancelled after four years of development a bigger deal still. The volume of replies and interest reflects that.