Meh, Lionhead have been around for ages and made so few actual games. Amongst them the sequels tend to rip off or make most of the best aspects of the originals worse. The last Fable was awful, the previous Fables ripped off the story of the earlier one so were to my mind basically remastered versions of the first one.
Black and White was a great concept but really didn't work. Lionhead has spent years making pretty average games out of great ideas, probably at big expense and not great profits as Molyneux seems to be another one of those think big, attempt to do too much and spend years making something way too complex only to eventually release something much smaller, simpler and lacking.
Spore, Duke Nuken Forever, everything Molyneux all tend to follow the try to much, end up releasing something simple and not great pattern.
I can imagine the game got cancelled because they either tried to release Fable 1/2 again with DX12 graphics, or because they tried to do something new, far reaching, ultra complex and ended up with a Duke Nukem style mess MS don't want to clean up.
I wouldn't say it's the end of the game though, for MS it could be a lot cheaper to close Lionhead, get rid of everyone then hand off the game to a cheaper team to salvage what they can out of it.
EDIT:- I wrote this without having known an awful lot about Fable Legends, having read more, it screams out that it's another one of those 'tried too much, failed... have no idea how to make a releasable game from this..." feel about it. Their update video saying it will take longer because they've "essentially made two games together" and it's "bigger than they anticipated". Some devs just have ideas but no sense of how to deliver a game based off those ideas. They want to make the most complex game ever made and basically fail every single time. Every one of these massively over reaching games fails and yet the same guys keep doing it over and over again.