From an outside perspective it looked like they didn't really know how to build and run a development studio, much less a gaming studio.
First off they had overpaid worthless execs; and the ones that did know what they were doing were forced out or saw the writing on the wall such as Brett Close.
Second problem, according to several of the post-mortem write-ups, was a bloated and top-heavy middle management that had leadership and organizational problems, not to mention Curt occasionally just stopping by and overriding orders at a whim. They had no one that could actually run a development studio and ship a product; and the guy they finally DID bring in who could actually do this job, that John Blakely fellow form Zynga, was hired something like two or three months before the collapse.
Third, and this is just from my perspective watching over the 38 Studios job listings every now and then - I remember seeing open listings for what seemed to me like fundamental positions really late in development. Stuff like engine architects, senior world builders, and network engineers were all still open while tons of "concept artists" and "animation assistants" were always filled quickly.
By all accounts it really looked like the art and assets team in 38 was pretty solid and talented, but that alone won't build you a functional mmo.