Actually, I think it was discontinued because hackers soon modified it into what everyone initially expected it to be; a new machine that can play every NES game in existence. However, because hackers implemented this instead of Nintendo, the entire library of NES games, became completely free on it. That must have angered Nintendo's software partners who probably asked Nintendo to shut-down the whole project for helping to make piracy, of these games, much more convenient.
I suppose that if Nintendo had just designed the thing as we all had initially expected, they might have been able to prevent the widespread piracy. However, I don't really know how much that would have affected the price of the device.