Capcom has stated on Twitter the main reason the Mega Man Legends 3 Project was cancelled, was due to lack of community support.
According to the various tweets (via GameFront):
“It’s a shame the fans didn’t want to get more involved if we saw there was an audience for MML3 people might change minds. Unfortunately so few fans took part in the creation of the game. It was felt the project was not worthwhile. We weren't asking people to do much but response to dev rooms was cool at best. The game was meant to show people how games are developed, [and] the original comment was in relation to the interaction in the Dev rooms NOT the fans who have been nothing but supportive."
Brian Austrin, was just one of many fans who helped create content for Mega Man Legends 3 and even put in 15 hour work weeks and passed on many social situation to work on his part of the Prototype Project.
"Capcom had this great contest where you design a townsperson, someone that lives in one of the villages," Austrin told Game Informer. "They had an assortment of characters like a construction worker, a policeman, and what we had to do was in 300 words or less, describe their personality, give them a name, and a little bit of backstory.
"I made this great character named Osono. She’s like this feisty, very strong woman, and the director of Legends 3 [Miasakazu Eguchi] really loved the character."
"I really think that their trust bank has been shattered," says Austrin regarding the canceled community-driven project. "This isn’t the first thing that they’ve done, not just with Mega Man, this is the second Mega Man cancellation within four months. Then we have the other stuff like the Mercenaries 3D DRM, and it just keeps going and going, and they’re establishing this track record."
Capcom informed contest winners that they would be compensated for any work created as well as retain all rights to the contributions.
Meanwhile it is being rumored that Capcom is kicking fans dressed as Mega Man out of its booth at Comic-Con, and that Seth Killian, a strategic director, online & community, and special combat advisor for the firm was even punched in the face by one.
We don't believe either for a second, and Capcom has said it isn't true, but yeah, it's all over "teh twitt".