"After careful evaluation of current market place realities and underlying economic considerations, we've decided that this was not the appropriate time to launch a graphic adventure on the PC" says Mike Nelson, Acting General Manager and VP of Finance and Operations. There is currently no plan to reduce staff.
Games are developed under constant producer scrutiny. If at any point "The Man" says, "Let me see what you guys have..." and what he gets isn't up to par, he'll cancel it on a whim. They don't just let developers run amuck and do anything.
Initial agreements to produce a title are based on concepts and ideas and most often never physical materials. Just because an idea sounds good (like this) doesn't mean what they've worked on is anything but crap; THAT'S for "The Man" to decide.