"It reminded me a lot of Marvel: Ultimate Alliance. Running at 5 fps," claimed the tipster, who is said to have seen the game about six months ago. "[It] kept crashing and apparently hammered the hell out of both the console's hard drive and Live infrastructure."
He or she elaborated that the project has been, "in the shitter for a LOOOONG time." Other details indicate that the game's fighting system had yet to be decided up until a few months ago, with the team split between multi-button combo-based combat and the one-button fighting system used in most MMOs, such as Cryptic's own City of Heroes (PC).
Another tidbit suggests that the developer was having problems figuring out how to implement popular Marvel characters without detracting from the game, and that the Xbox 360's keyboard controller add-on was "pretty much exclusively designed" with Marvel Online Universe in mind. The release of the keyboard earlier this year is said to showcase Microsoft's lacking faith in the project.
Outside of Microsoft's "We do not comment on rumors or speculation" line, neither Microsoft nor Cryptic Studios has formally responded to the allegations of the game's cancellation. 1up's source claims that, unless a miracle occurs, official word of the game's cancellation should arrive in a few weeks.