Its not the game itself that killed modnation, its the franchise. Just go on youtube and look at the respective video views!
Modnation: ( 444,368 video views, and this is 3 years old!)

LBP Karting (841,728 video views, and this is less than a month old.)

Modnation was fun for the studios first effort, and Sony saw that, so they probably said:
“Hey, we see you’re um game is being well received here, but it could be better, how about we let you give it another shot, add all the features you couldn’t do first time round and we’ll let Media Molecule give you a hand. However, however you have to use Sackboy because he sells more!”

As long as we can import and export our costumes (To and from the LBPVita, LBP2 and LBP1)and they fix the framerate and load times (things they’re promising!), I’ll be happy.

Also, there isn’t just a battle mode, we can make our own modes, from trials HD rippofs to boss battles, they said everything shown in the in-game trailer was made using in-game tools, so I think its going to smoke Modnation Racers!

Also, Super Smash Battle Royale Title Fight Mellee Brawl (or whatever its called) is probably real game.
And I’m thinking the gameplay will be a cross between Tekken, Street-Fighter and Smash Bros. Accessable, but not a clusterfuck!

Gonna Miss Joel Mang.  Hope he gets Better soon.  I will donate any good organs I got left if he needs em.