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Honestly I'd chalk it down to bad luck and timing
2 was a sleeper hit, but what really killed it was the PSX entry being cancelled. Lufia 2 came out in 1995, and the PSX entry was supposed to be a 1998 release. After the publisher, Nihon Flex, went bankrupt Neverland couldn't really get the PSX entry out the door + combined with scrapping it and doing a Game Boy Colour entry instead meant the next game, The Legend Returns, didn't come out until September 2001; At this point, the GBA had been released in Japan since March the same year.
So yeah, a six year hiatus between entries and the next mainline game being on a dead console really put it in a bad spot. Add to that Ruins of Lore getting a poor reception and the series was essentially dead in the water.
In hindsight, if they had gotten the PSX entry out in 1998 as planned I think there's a good chance the series would have been a lot more well-known. The long delay between 2 and TLR meant Neverland couldn't really strike while the iron was hot and capitalize on the IP.
