My understanding was that they wanted Modern Warfare 3 delivered in 2 years and that they were holding their MW2 royalties unless they agreed to it, and the heads of IW wanted to do something that wasn't Modern Warfare
That's similar to what I heard/read. More detailed in fact, and that makes more sense. The gist I got during the whole thing was that IW was the one twisting arms asking for more money, etc. And instead of negotiating with them activision fired them. Supposedly without pay.