More UWO
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I think when they saw UO2 they saw a product that was very similar to UO that's already a proven success, and rather than to continue on with two products paralleling each other, they probably decided to continue the upward movement of the original by throwing more resources at UO and making it even better than it is now.
The interesting thing is that EA had about 2 years to make this decision. It was called UO2 for a reason all along, therefore it obviously would have parallels with UO, but it was supposed to be much better. And it's not exactly as if EA was funding a hidden development team, and then last week took a look at the game for the first time and went... "Hey, here's a product that's called Ultima Online 2 and you know what? It actually shares the same world as that game and has some similar features... this looks bad so we better do something." They knew all along that it was a successor.... I'd like to hear the truth from someone. Seems simple enough. Gamers should understand.
Personally I believe it had nothing to do with UO but a combination of funding allotment from EA, perhaps a shakier game than we had believed, and the risks to EA associated with that.