This is pretty much happened with Angel Season 5. WB forced them to make the show more episodic since Season 4 was super serialized. It didn't work and the ratings stayed pretty much the same and the show got cancelled after Season 5 wrapped up.
Not according to head writer David Fury - he attributes it to a power play between Joss Whedon and the WB.
http://en.wikipedia.org/wiki/Angel_(1999_TV_series)#Cancellation
The situation described is not at all uncommon out here; shows teetering on the brink of cancellation or shows that do respectably but just don't know if they're coming back -- writers are held committed to their shows until a decision is made. Most good showrunners will still say at the end of the season "Go find work, it'll be a while before we know." and if the writers find jobs, they then clear it with the showrunner and work out scheduling or they officially leave the series.
But if you don't know when the show is coming back, or if it's coming back, it becomes this big question mark. Do I keep looking for other work? Do I hold out and stay? Do I try to find something to do in between, however long that in between will be?
This is almost exactly the scenario I'm in right now, actually -- I left one show when we wrapped for the season for another show, which turned out to be a giant puddly mess of shit (despite being a critical darling and a ratings hit out of the gate), and I elected to wait for the first show to be renewed. That first show? It got canceled not long after. So, I'm trying to find another show to work on.
February is a HUGE time for staffing shows because it's pilot season. Expecting writers to sit around waiting and not look for other work on the chance that a series is returning but not confirming is part and parcel for the business, but it's also ridiculous, given that by May, when the show likely would have been gotten the renewal, pilot season would be over and all the new series for the coming fall would have been staffed up. Timing is everything, and power play or not, it sounds like it was just as much about Joss protecting his writers and their ability to find work, should the show eventually get canceled.