Majesty market is really so small ?
Anyway, the main default of M2 was the IA. And it could be solved easily.... with a proper

cool

scripting engine. Majesty is all about IA of heroes and monsters.
Solved easily? On the contrary.
Being small is not the only issue to consider.
Players play games for various reasons and quite often, those reasons are conflictual with some orientations taken by the game design.
By this, I mean that not all players accept the game as it is and would prefer it to be modify in order to fit their tastes. This divergence between the players' expectations and what a game can be can lead for example players to reject managerial mechanics in a management game. Game X is a management game but players simply refus to take managerial decisions when playing that game.
Players play to command and conquer. They want to be big in the gameworld and they want to dominate. From this point of view, any game must allow them to do and any feature that put itself between players and command or domination is likely to be a problem.
Majesty in this regard in no different. Players playing Majest does not mean that players accept that Majesty is essential a game featuring semi-independent agents acting out of personality and that are not to control directly but influenced.
Players who accept Majesty as it is try to make the most of the game mechanics of heroes acting out of personality.
But players who want to command and conquer, semi independent agents acting out of personality are nightmarish. They absolutely do not want that in their game. It is a roadblock.
The AI is the biggest problem to be solved and the most difficult to solve as players do not accept it.
Remembering the threads on Majesty 2, certain players revealed they thought that Majesty was a great game apart from heroes acting on their own. Like telling that you love participating to a marathon, except that part when you've got to run.
The mistake is to consider that players who play games are willing to play the game according to the game mechanics. Wrong. Players want one thing in their game: command and conquer.
You could think that players coming to management games would accept that the game revolves around taking management decisions and that the discussion on the game would hinge around the quality of implementation of the management mechanics. Nope. It doesnt as soon as the feature puts itself between players and their thirst for domination and control.
Developping a management game for players who reject the idea of taking management decisions is not easy.
Developping a game that features a certain type of AI players reject is not easy either.