There are many theories on why mech games died out. The question I have is "why are they coming back now?"
Perhaps these two issues are tied closer together than some may think. It’s a matter of innovation, I believe. With new concepts made possible through improved network and graphical ability, the once tired mech genre stands a chance to fight again with games like Hawken, MechWarrior Online, and Armored Core V.
After all, it seems throwing a mech into an FPS is the latest gimmick (see: Gears of War, Killzone, F.E.A.R.) Maybe people want a whole game based around that concept? After playing Armored Core V, I have to deduct that people will still be wanting that game.