Massive connection issues when it came out meant it didn't establish the player base it ought to have, and the extra demigods that where supposed to come out "by release or soon after" have... well, apparently just been started. Obviously by this point you can't call Demigod "dead", but if it came out flawlessly it would be much, much more popular than it is now.
On the flipside, they still haven't abandoned it, which is good. The new demigods are a start, but modding, spesifically custom maps will really be the boost this game needs. At it's heart, Demigod really is a good game, and if it gets proper love over the next year or two, it could be one of the long-standing games that have continued popularity, like Unreal Turnement 2004 and Team Fortress 2; two games I've been quite a fan of, and have largely stood on their modability and continued updates.