Far from a simple research project, the Courier team had more than 130 Microsoft employees contributing to it at one point, and they reportedly produced several prototypes -- which, incidentally, ran a heavily customized version of Windows (to the dismay of Windows lead Steven Sinofsky). The project was also described as "not a whim," and one employee said that it was far enough along that could have been completed "in months" if more people were added to the team -- although that's disputed by Microsoft spokesman Frank Shaw.
According to Greene, things came to a head in early 2010, when Steve Ballmer had arranged for Bill Gates to meet with J Allard, Robbie Bach and two other Courier team members. Allard had specifically designed the Courier to be a content creation device that would complement, rather than replace, a smartphone or a PC. As the story goes, Gates asked Allard how a person would get email on the thing, and Allard replied that he wasn't trying to build another email experience -- that people could use their phone or PC, or get email on the web. It was at that point where "Bill had an allergic reaction," according to one Courier worker who reportedly spoke to an attendee of the meeting.
That meeting didn't kill the Courier project instantly, but it seems like it was the beginning of the end. It was eventually cancelled a few weeks later, reportedly because it "didn't clearly align with the company's Windows and Office franchises." As CNET notes, both Allard and Bach would also wind up leaving the company a few months after that, although they each insist that their departure wasn't due to the Courier decision. Of course, this is all still just scratching the surface -- hit the source link below for the whole story (or half of it, at least -- part two is due tomorrow).
Update: CNET's now published part two of the tale, including the interesting tidbit that J Allard is one of the biggest backers of a Kickstarter project that seeks to bring some of the Courier to the iPad.