There is probably not just one reason why it was cancelled, but a combination of reasons.
I do think viewership was one reason. Yes, 1 vs 100 broke a record of simultaneous players for a single video game session, but attendance did drop. I've stated this before, but trivia just isn't popular in the XBox crowd. I honestly feel most people saw 1 vs 100 as an easy way to get 200 achievement points, or saw that you could win prizes. Unfortunately, I feel most people misinterpretted the prizes in terms of a bonus to "Look, Fr33 Haloz Map Pax!", rather than just a bonus. And unfortunately for them, they quickly found out that it was run like a game show where only a select few actually win anything substantial, and not just a free MS Point card. During the first few weeks of the beta season, people were actually being turned down to join the Live games due to too many users, and the last few weeks, the game could barely draw 15,000 people.
Mismanagement... What can I say? That was a factor in my opinion. But every company, especially one as large as Microsoft, suffers some bad choices. In this case, it just happens that the victims are the people who enjoyed playing 1 vs 100.
Financial issues. Maybe Sprint is having problems. Maybe they decided that the advertising just wasn't worth it. Maybe the fact that 1 vs 100 is coming back on the air, Endemol saw how well it was doing on XBox Live, and decided they felt they could require more money for the license. Whatever it was, money is definitely a motivating factor for 1 vs 100 not coming back. Remember, it costs money to run the servers. The people running the game and creating the questions don't work for free. Chris Cashman doesn't work for free. Giving out prizes costs money. (Even though you could technically argue MS doesn't lose money by giving away points, because people might buy things they wouldn't buy in the first place, remember that they still owe the developers of the arcade games they gave away a fee for every download).
Petitions and boycotts seldom ever work, because companies realize that the populous in general is lazy for the most part, and will eventually cave. (Take the Modern Warefare 2 boycott for example).
Will it come back? Maybe things will change in the future. Until then, just view it as having participated in an experiment for MS's future endeavors.