Actually, I think it does have something to do with language--but not because of bad language. Avenue Q is a show that you have to understand English to enjoy--most of the shows in Vegas rely on spectacle (including Phantom) or familiarity with the material (Phantom and Mama Mia). Vegas is primarily a tourist town and most of those tourists are from other countries. When you see the Cirque shows one of the brilliant things about them is that there is very little dialogue--and no important dialogue.
Also, though Vegas is trying to cultivate a hipster reputation, those hipsters don't go there to see theatre--they go to gamble, drink and go to the ultralounges. Avenue Q, while it is a smart show is not a hipster show in the way that they would want. Avenue Q deals with issues that these people don't want to think about--at least not while they are in Vegas.
Then there is the venue itself--it was hard to find and there was very little street advertising to encourage people from walking in.
Vegas is really not a theatre town. The few shows that do well there are very much escapist in nature. Even light message shows like Hairspray are too heavy for Vegas.
Yes, we do need a third vampire musical.--Little Sally, Gypsy of the Year 2005.