[Pål Jensen]

Yes, it was the MD-S digital project that killed it. The MZ-S were derived from the cancelled digital project, that incidentally costed $20 million, probably in order to get some return from the project.
As I remember it, many of the engineers thought the whole project madness and they were very dissapointed by the cancellation of the MZ-1 project. On the other hand, it would have been rather late to the film DSLR market on the eve of digital.