Ack, you know, Duncan, I was going over the guides in my head as I posted and just skipped over the Paladin and Monk guide - likely because I try to selectively ignore the Monk.
So 5 player's class guides and 36 books total. Heh.
Anyway, my thoughts on the setting's shortcomings and eventual demise:
First off, yes, the fact that it's a third party contributed to this, to a degree. Official tends to mean something, I think, regardless of whether or not it should. When I first picked up the Creature Collection, my thoughts were: this is being put out by a division of White Wolf and, therefore, should be able to be trusted. Of course, that proved rather wrong, but then, this was in the early days of d20. The point still stands: I was familiar with White Wolf, knew White Wolf and trusted them ahead of time due to my enjoyment of the World of Darkness whereas other companies I had less faith in. Similar thoughts likely entered into other buyers heads: they knew this company or that one producing d20 books, so stuck with them. Them and, of course, the one constant - Wizards of the Coast.
So officiality means something. But that's not all that does, obviously.
Let's go back to the first Creature Collection. Bad first impression to be found there, once people became familiar with the d20 system. In the short term, I understand it was quite a good seller, but in the long run, as a first impression that, upon closer inspection, wasn't so hot, possibly lead to distrust in Sword and Sorcery Studios and the Scarred Lands. The mechanics weren't there and flavor is generally going to be hit and miss.
From there, while I do believe the mechanics picked up from that book, they never truly were as solid as they should have been. The setting had flavor, but lacked a solid mechanics base. The Creature Collection Revised showed a lack of understanding about level adjustment and the enhanced character level. Crimson Abyss showed a lack of understanding about how base attack bonus and base saving throws advanced. While little things, they're also relatively basic and echoed throughout the other books, sometimes more subtley, sometimes more blatantly. In either case, even in the best of Scarred Lands books, I think the mechanical foundation was a bit wanting.
Related to that, I believe that the release of Echoes of the Past couldn't have been timed worse. A 3rd edition psionic-based book coming out within a month or so of psionic rules being revised isn't likely a good thing. I lack sales figures for this (and for most of the books, so this all boils down to how I see things), but I wouldn't imagine them to be great. A niche within a niche (campaign setting and psionics) with essentially obsolete rules? I can easily see this book having tanked and badly.
The transition from 3rd to 3.5 may have hurt the setting all around. The player's class guides, for example, showed an imperfect understanding of the rules changes. This is understandable - but, by that same token, I can still see that having contributed to flagging sales. That these books already aped what was currently out - the various class guides put out by Wizards or other companies - also means that there was a smaller crowd looking for them. For my part, while I don't think they were necessarily bad, I don't find them substantially better than the other class guides. If you're not into the Scarred Lands, they're arguably worse, because they're strongly tied to the setting. By that same token, for a Scarred Lands fan, they do become better than the others, perhaps - but I don't believe that's quite enough.
Edge of Infinity came out right around the end and decision making time, anyway, but it suffers from the same problem as the player's guides - it too closely resembles the Manual of the Planes without being substantially better unless you enjoy the setting. Arguably worse if you don't enjoy it.
Missing Info: It's all well and good that Joseph finally posted the Ignan template on-line, but it should have been in the Scarred Lands Player's Guide to Wizards, Bards and Sorcerers. Just like the various monsters described in the Termana hardcover should have been in the third Creature Collection, like the Termana hardcover said they were going to be. Web enhancements certainly help, I think, but I don't think many gamers bother with that stuff. If something is supposed to be in a book and isn't, well, there's a dissatisfied customer who might not bother with the setting or publisher again.
Now, here we begin treading even more towards opinion then a few not too far out assumptions/leaps of logic...
Metaplot: This started to kill the setting for me. Within a relatively short span of time, as I saw it, the setting started to change. A god was brought back from the dead. Locked djinn cities were burst open. Unique setting races were turned over to humdrum, vanilla normal versions of that race. Things I initially enjoyed about the setting were destroyed by the grindstone of plot. For my part, I don't pick up campaign settings so they can change on me, I pick them up for the pieces that I can later move. Once a setting begins changing, it starts to look less like what initially attracted people to it in the first place.
Mood/atmosphere drift: When I'd initially picked up the first Creature Collection, Relics and Rituals and even the Divine and the Defeated, the setting came across as a rare-magic, gritty setting that was fairly focused around the Mediterranean in feel, with touches of the Mesopotamians, Greeks, Romans and their myths. The more books that came out, the more it started to gloss itself up, pump up the magic and diffuse its world focus from the Middle East and Eastern Europe to the whole durn world. This came fairly early on - as of at least the Ghelspad hardcover if not sooner - but it still stands that I believe the setting lost the initial focus it had roughly in place. The books that described gods throwing down titans, of magic items being too precious to be readily sold and a city-state system reminiscent of the ancient world gave way to pearl divers, massive nations over city-states (Termana has not a one city-state) and being right out called high-magic. The setting still had a bit more edge to it then other mainstream settings, but it still came across as fairly blunted and generic over the passage of a number of books. There became less and less to distinguish it from other settings. Towards the end, this almost seemed deliberate: forsaken elves became high elves and Termana has a stronger monster focus on yuan-ti and gnolls rather then asaatthi and ratmen. Perhaps an attempt to broaden the fanbase but, apparently, it didn't work.
I also believe the setting originally had a fresh, raw feel to it. The big stuff happened 150 years ago. There are still folk around in the setting who remember it. The devastation is still recent, new. This gets quickly dispelled - history after history roles around, killing that fresh feeling. Perhaps hard to hold onto, but, all the same - the setting was diminished for being unable to hold that spark.
Inconsistencies: Some of these were hard to avoid. The setting didn't seem too pegged out as of Relics and Rituals and the first Creature Collection. Still - ideas that were previously made to be settings standards (give proper due to all the gods as a pantheon, or the individuals you neglect will smite you, established at least as early as Mithril), was later ignored in future books (such as the unexplained singular Chardun worship in the Faithful and the Forsaken). More and more there seemed to be less setting cohesion. It's not that all the ideas were necessarily bad ones - just that they didn't jive with the setting, or outright contradicted it in some places.
While I personally enjoyed the other continents of Scarn being explored, I can't deny that there's a number of people who weren't pleased with that fact. I certainly believe there's a case to be made for the setting having over-extended itself. Too much, too soon.
Continuing in that vein, others have also mentioned a glut of products: At 35 books thus printed, in the span of, say...4 years...that's over one book every two months. A few have complained this was too fast. In light of the low quality some of these books have, I have to agree. The thought may have been that the products have to get out so that people see them, so that S&SS can compete, so that they're in everyone's minds...whatever. I don't know. It doesn't seem to have worked, though. The rapid pace seems to have backfired.
I'll also say that I think some of the books were, simply put, just horribly written, and leave it at that. Some of it's a matter of opinion. Tastes differ. I've written a number of reviews and very well might write a few more on Scarred Lands products in the days to come (at this point, I don't think even a bad one could hurt). Go see my opinions there.
And, lastly, Nightfall: This isn't meant as an attack. The setting's done with now, anyway. But your pimping of the Scarred Lands generally came off as too strong, too fanboyish and, at points, drove me to despise the setting. I believe it hurt, not helped, the setting. I'm not saying I was any better - I've been fairly critical of the setting fairly consistently - but I've never claimed to be the setting's PR fan. It's to be expected that anyone trying to sell something is probably partial to it, but Nightfall, you came off a little too strong - and sometimes quite confrontational to anyone who didn't seem all that enthused with the setting. I do think you drew some folk in but, by that same token, pushed others away who might otherwise have enjoyed the setting. If it means much, I don't believe the difference was that large - just one of those many factors as I've already gone through.
Heck, I'll even go so far as to say I may have hurt the setting - I've people in my reviews saying they didn't buy a book because of what I wrote. I still stand by what I wrote, but it can certainly be given some blame.
Anyway. Hopefully I've not pushed anyone too wrong - by this point, I don't know that it matters anymore, anyway. While I doubt the Scarred Lands will come back, at least in S&SS's hands (once a setting's failed, after all, even if it was due to mismanagement and poor writer choices rather then setting quality, I don't see it being seen as economically viable by the money-folk), perhaps something can be learned here. Particularly for the Ravenloft line, which I feel may suffer a similar fate in the future...