A post to the Codemasters Forums (thanks Exfileme) by Codemasters' Community Liaison Manager Satine sheds a little further light on the technical issues mentioned in the announcement that Dragon Empires is cancelled (story). Here's the deal:

As you are all aware, we did have some difficulty with certain aspects of the code, namely the server issues. Over the last month or two we have been reviewing the situation and looking for ways to resolve them, which inlcuded seeking external help.

However, after a full, in-depth analysis, research and review, it has been decided by the board that the project has too many risks to be considered viable at this time.