There were primarily two modders on the project.
The decision was made to drop it because it just wasn't enough manpower to mod everything. The mods required to fix the game system as they wanted were too difficult to find. Additionally, distributing the mod would have been no easy task as it would have required a modded xbox 360 or for a person to send in their harddrive to install the modded game to that harddrive. Originally, when you ran a game install from the harddrive Microsoft would just check to see that the sku ids matched then run from the harddrive. This allowed you to play a modded game while it thought it was the vanilla disc. That was changed shortly after once Microsoft realized it. Also, you wouldn't have been able to go online with it because the online 4.1 patch would download and take priority.
The modders found it easier to just mod DOA3 instead of trying to make DOA4 more like DOA3. However, again, the low man power really just grinded it to a halt.
I know that the DOA2 Online modders have been working on importing DOA3 costumes and stages to DOA2O. I wish they'd be interested in importing DOA3/4 move lists and animations.
One benefit of the mod for DOA3 and DOA4 was that it allowed the modders to find all of the frame data for a character, including moves that didn't make it into the final list. For example, it proved that Leon's
was -2 instead of +0 on guard in DOA4, and Hayate's
was +1 instead of +2 on guard in DOA4. The ability to grab the frame data of DOA3.0 and DOA3.2 was also a benefit. I believe grap3 has been working on his own to get frame data for all the DOAs up on the wiki.