The reason for the cancellation is that the app still did not have official approval, possibly due to the fact that a first party app from Sirius itself is also in the App Store pipeline, but that is unconfirmed at this time. And so, since the app was in approval limbo, having not been approved or denied by Apple, the developers chose to fold.
Truly, a sad day for people who want streaming music on their iPhone, but for some reason haven't figured out how great Pandora can be. Still, it sounds like there's hope for an "official" app from Sirius XM. [StarPlayr via TUAW]