Bad idea or not, there were plenty of people at both Microsoft and Ensemble Studios who thought making a Halo MMO was a good idea. So many, in fact, that prior to the game's cancellation, it had actually been given the green light to enter full-blown production, and it was only "some reorganisation at Microsoft" that killed the project off.
Ensemble has been wanting to make an MMO for a long time. That was in production for a long time. The Halo IP was a great IP to launch an MMO with. Microsoft... hasn't had the best track record with those.
And we worked on it for a long time—we had staffed up an almost-40 person team. And then there was some reorganization at Microsoft, and the new bosses thought it wasn't the best idea anymore. It had actually been green-lit, and then it got cancelled after that.
So it's the "new bosses' fault"? Sounds like the smartest move Don Mattrick's made to date.