Originally Microsoft turned the developer down because there was a stipulation that games must be under 2GB and Stranger's Wrath was too big. Just Add Water trimmed it down, but Microsoft still said no.
It then claimed that a game must score above an 80 on Metacritic to be on XBLA or Games on Demand, yet the original Xbox exclusive received an 88, while the HD version on PSN scored an 82.
Finally, Microsoft said that a game needed to sell a million copies to be eligible, which Stranger's Wrath fell short of.