The theory comes from the fact that the majority of M.U.G.E.N's character creators are whining bitches who lack any ability to share.
Apparently, taking a character and hosting it on your own site (known as warehousing) is an unimaginable wrong that you should be flogged for, even if you credit the character's 'creator'. Saving the 'creator's' bandwidth, and alleviating the need for people to spend hours wading through a million broken links and badly-designed sites in a multitude of languages is something that should never be done under any circumstances.
People often cite Elecbyte's discontinuing development of the software as the reason that the M.U.G.E.N community all but died. A little known fact is that the people who should have been the ones to keep it alive and fresh with new content actually killed most people's interest in the 'scene' by being possessive, whiny little bitches who decided that the best way to do justice to the concept of a nearly infinitely costomizable figting engine would be to do whatever they possibly could to stop new content from reaching people.
Guy 2: Dude, this is Mugen. I can put in any characters I want. I can play as Scorpion and fight characters from other fighting game.
Guy 1: Cool. I'm gonna download it and the characters when I get home!