Oh, a few reasons, really.
1. Lots of "money mark" mistakes. Bauer was always great in handling the production value of his product, but he was too willing to throw money around and not stringent enough.
2. Shortsightedness. Court made a lot of bad decisions in quick time. Bad TV deal with a Florida-exclusive (unless you had a certain satellite package) TV channel, horrible tape/DVD distribution deal, trying to run the already crowded NY/Philly markets at the same time as CZW, ROH, and even XPW (who had a leg up in tape distribution and notoriety).
3. Simply put, the booking. It was too similar to ECW, but also was booking talents that were being given grander stages elsewhere (CM Punk, Jerry Lynn, Samoa Joe, Homicide, LowKi, etc.) in increasingly annoying ways. There's a great Ki/Cide match from one of the later MLW v1 episodes that demonstrates everything good about what MLW could have been, but also came at a point where ROH and TNA were all the rage with the indie fans, and MLW couldn't compete with the tape distribution or positive word for ROH, and they definitely couldn't match the weekly PPV market penetration that TNA had.