The core of Blizzard North, namely the upper echelon; the Schaeffer brothers, Bill Roper etc. left Blizzard in 2003. There was an internal disagreement between North and the main Blizzard over Diablo 3's development. Blizzard North wanted Diablo 3 to be an MMOARPG, the same core Diablo 2 style but with an open world. There was disagreement between the two parties over this approach and the core of Blizzard North quit leaving Blizzard with their valuable Diablo IP. My guess is that with WoW soon to release and well into development there was some static over perceived competition between the two IPs.
What remained of Blizzard North continued to work on a different approach with Diablo 3 until 2005, at which point that project was scrapped and what was left of Blizzard North either left the company or was assimilated into the main Blizzard. Those screenshots you see circulating of the previous Diablo 3 that are in line with the real Diablo art style are from the work that was done between 2003-2005.
There is nothing of the actual Diablo team in Diablo 3 apart from one or two employees that were hired on after the 2005 dissolution of what was left of North. I don't think Vivendi really had much of anything to do with it and it was all internal politics within Blizzard.
Then in 2012 we wound up getting the pile of shit that was Diablo 3. Basically Diablo as interpreted by World of Warcraft designers. We ended up with a console game; Call of Diablo : Deckard Ops.
lol, disaster of a game.