No big surprise
I've followed the Skycar for a long time, and most of its problems come down to the engines.
The Bell X-22A (http://en.wikipedia.org/wiki/Bell_X-22) is proof that the concept isn't totally nuts, and that something like this is capable of flying out of the ground effect. Even the suggested horsepower that the Skycar would need to fly seems to be proportionate to the horsepower of the X-22A, adjusted for the differing weights of the two craft. The fact that the X-22A was never developed into a practical military vehicle suggests that the concept wasn't considered practical for actual military operations, but nonetheless, the X-22A is proof that something like this really can fly.
The problems are with the claims that Moller makes for the Wankel engines, and also the projected range and speed for the craft. Moller claims that these engines will generate very high power-to-weight ratios. He also claims that they will run on a wide range of fuels, including gasoline, diesel, ethanol and (of course!) bio-fuels. The problem with this is that in general, engines that are configured to run on a wide range of fuels are not particular efficient with any single fuel, because the engine settings aren't optimized. Conversely, engines that delivery a high specific power output are generally finely tuned and optimized to a particular fuel.
There are also some interesting musings about the range and fuel economy claims for the Skycar here: http://hamiltonianfunction.blogspot.com/2009/03/moller-sky-car.html and here: http://hamiltonianfunction.blogspot.com/2009/03/horsepower-fuel-efficiency-and_31.html. I don't agree with all of the assumptions that the author has made -- He has made fuel economy calculations assuming that the Moller's maximum fuel economy occurs at the craft's stated cruise speed (275 mph), while the most efficient cruise speed for the Skycar is claimed to be 140 mph. Nonetheless, the calculations do suggest that many of the claimed performance figures for the Skycar are most likely fantasy. In any event, making range and fuel economy claims for a craft that has never even made a forward flight (to say nothing of transitions from hover to forward flight and back) is nuts.
So I don't find what appears to be the downfall of the Skycar to be surprising at all.