Update, May 1: LG has officially denied all speculations of dropping the Windows Phone OS. The company may be focusing on Android OS right now, but it is still doing R&D on WP. Also "Regardless of which OS, LG is committed to offering consumers as wide a choice as possible", as the official statement goes.
LG is dropping from the Windows Phone race and has no plans to release any gadgets of that kind. The decision is not final, of course, and LG will continue its partnership with Microsoft.
As you can imagine, LG’s U-turn is based on the really weak sales and most probably the threat from the Microsoft/Nokia team.
Microsoft’s CEO Steve Ballmer has a scheduled visit in Korea in May to explore partnership opportunities. LG is most probably on the list too, so we’ll have to see what happens then. Keep in mind though, that Samsung will surely be pushing WP8 running devices later this year, which will be an additional threat for everyone else.
Anyway we look at this, it seems a wise decision on LG's behalf - at least for the time being. The Lumia lineup is the most popular WP brand and, combined with the low user demand, it is quite natural for LG to focus completely on Google's Android OS.