According to this report in Technology Review, the virtual world failed because whilst it was crammed with educational content, no one went there because "it was no fun" and they forgot to include the puzzles and the monsters and the game-play elements. The work was supported by a $250,000 grant from the MacArthur Foundation's digital learning programme. Whilst this is pretty big money in educational grant terms, particularly in the humanities, it's a drop in the ocean when compared to the millions of dollars that go into creating the online MMORPGs that we normally review.
It is a lesson well worth remembering for everyone creating educational games, you need the educational content AND the game content. A hard balance to strike - I speak from personal experience here.