Joystiq has also gained information on this development, with a source claiming the project "just wasn't up to polish." Stripped down to the core ideas, the game will now restart its process from the ground up.
Blizzard is no stranger to long and laborious development schedules. Diablo 3 famously went through multiple redesigns over ten years of development, and StarCraft Ghost was "postponed" after years of work, then never seen again.
Blizzard is gearing up to release a new digital card game named Hearthstone later this year, and then host a sold-out BlizzCon 2013 in November.
Update: Zam (via Massively) reports Blizzard, when approached, responded with this statement:
"We've always had a highly iterative development process, and the unannounced MMO is no exception. We've come to a point where we need to make some large design and technology changes to the game. We're using this opportunity to shift some of our resources to assist with other projects while the core team adapts our technology and tools to accommodate these new changes. Note that we haven't announced any dates for the MMO."