Edit: Looks like what I posted I got only half right, Corefracture has the better info (number 4, below) as he worked there...
I don't think Kingdoms bombed, really. It was an enjoyable game that I remember, and an amazing game from the perspective that it was an indie's first title. At the outset, the future was very bright for Big Huge Games/38 Studios.
I think the issue was, it was more that Curt Schilling had a bigger plan than just this game. This was just the beginning. The first game was supposed to be a taste of what was to come. 38 Studios were also attempting to create an MMORPG in the same setting as Kingdoms, and it was going to compete with the likes of World of Warcraft. In addition, he had whole mess of other products in the pipeline like merchandising, novels etc...
Unfortunately, whomever okayed that loan (we know it wasn't the tax payers...) was an idiot, because (1) the amount they asked for wasn't enough to end up making a triple AAA MMORPG like WoW and (2) whomever okayed that loan was ultimately gambling with taxpayers f'ing money...
PS: Yes, I liked the game. Also, guess where I'm from?