[To Be Quite Honest]

Originally Posted by Yeah_Baby

Yes and no. The sets burning in a fire and being to expensive to replace is more accurate.

As well Rome was backed by three countries, USA, Britain, and Italy. Italy backed out after the first year due to the high cost to produce the show

"Between March 2004 and May 2005 Rome was filmed in co-production with RAI in the Italian countryside on Cinecittà studios' six sound stages in Rome. A collection of massive sets in Cinecittà studios' back lots comprised an elaborate "period reconstruction" of sections of ancient Rome.[7] It was a huge undertaking, with an international crew of 350, and more than 50 local Italian interns..."

"HBO Chairman Chris Albrecht announced in a July 2006 news conference that season two of Rome would be its last, citing the fact that the series (called "notoriously expensive" by Broadcasting & Cable) had been developed under a two-year contract with the BBC that would have been difficult for the BBC to extend due to the series' cost.[24][25] Of the storyline, co-creator Heller said:

"I discovered halfway through writing the second season the show was going to end. The second was going to end with the death of Brutus. Third and fourth season would be set in Egypt. Fifth was going to be the rise of the messiah in Palestine. But because we got the heads-up that the second season would be it, I telescoped the third and fourth season into the second one, which accounts for the blazing speed we go through history near the end. There's certainly more than enough history to go around." "
http://en.wikipedia.org/wiki/Rome_%28TV_series%29

Being that the set was going to change to Egypt for the 3rd season, the burning down of Rome's set was not a huge blow.