I believe the main reason JMS left Thor was because Marvel wanted to do a new mini-series - and Asgard was unfortunately in the crosshairs. Dealing with too many crossovers, and the consequences for the main titles when the dust settles, can be challenging and annoying for any writer.
Siege was billed as Brian Michael Bendis' conclusion to a host of plot lines that had been brewing in the pages of New Avengers for years. While Siege didn't quite meet the lofty expectations of everyone, it managed to be a short and good mini-series - beautiful drawn by Oliver Coipel.
To bring anyone unfamiliar with the Avengers around this time - essentially Iron Man, as head of S.H.I.E.L.D., was deposed after a disastrous Invasion by the alien Skrulls. The Skrulls where beaten, but Norman Osborn - who was leading Thunderbolts team at the time, managed to make the killing strike on the Skrull Queen - and in front of cameras. Osborn took advantage of this, and took his team of government-backed "reformed" criminals - and made them into his own twisted version of the Avengers. Osborn even went so far as to give a big middle finger to Iron Man, as he took Tony's armor, spray painted it red, white and blue - and called himself the Iron Patriot. Dubbed the Dark Avengers - Osborn replaced S.H.I.E.L.D. with his own corrupt organization, H.A.M.M.E.R. - and used both groups to hound the real Avengers, who where branded as criminals. The Avengers where on the run for quite a few years - and Osborn was making deals left and right with villains; Loki being one of them.
Joining his Cabal - Loki, Doctor Doom, Emma Frost, The Hood, and Namor -- joined together with the goal of making the world work the way they wanted it to. What did Loki want? Loki wanted Asgard off of Earth - and back in the Heavens, like it was before. Loki manipulated Osborn, even using his magics to falsely play on Osborn's fragile mental psyche. Osborn eventually agreed with Loki; among a list of other things Norman deemed wrong with the world, it was decided that Asgard simply couldn't remain on Earth.
With this tragic incident fresh in the public's mind - Osborn launched a full scale invasion of Asgard in Broxton Oklahoma. Ares, the Greek God of War and member of the Dark Avengers, helped plan the strategy. He warned Osborn, however, that if he was lying about the need the removal of Asgard - he would kill him. The Sentry, Osborn's god-like ace in the hole, was able to destroy Heimdall's observatory, in order to render Asgard blind to the attack. Without Heimdall's all-seeing gaze - Asgard could not be warned of their impending doom.
The battle between the Asgardians and the army of fake-heroes Osborn lead was brutal - mostly due to the enhanced power Loki had given The Hood - utilizing the power of the Norn Stones. Balder, as King of Asgard, lead his people with all his might - but they where simply overwhelmed.
Balder was eventually able to convinced Ares that he had been tricked - which turned the God of War against Osborn. The Sentry, having the so-called power of a million exploding suns, handily ripped Ares apart - to the shock of everyone on the battle field!
Thor soon arrived and joined the battle - even though he was technically still banished from Asgard. Thor was brought down by Osborn's forces - and television cameras rolled as they continued to beat him even after he fell. Seeing the violence going on in Broxton, the on-the-run Avengers - lead by Captain America gathered all the heroes they could get - and joined in the fight to save Asgard! Iron Man, who was hiding from H.A.M.M.E.R. in the town of Broxton, also joined the fray.
The real threat in all of this, though, was that of the Sentry. The schizophrenic hero, with the power of a god, was already being strained to his limit. His alternate identity, as the Void - the incarnation of all the evil in the Sentry (and his own worst villain) began to emerge like never before! Suddenly the Sentry was protruding spider legs, claws - and was ready and willing to destroy all of Asgard and kill everyone, Osborn included!
Even Loki knew he had gone too far. Fearing the Sentry would destroy absolutely everything - Loki reclaimed the power of the Norn Stones, and used them in fighting against the Sentry.
All the heroes where imbued with the same energy their villainous counterparts had. It wasn't enough, though, to save Loki's life. Even though all of this destruction was of his own making, in the end he died defending Asgard.
The Sentry was out of control, and was able to break apart the floating city - bringing everything crashing to the ground! It took the combined might of Captain America, Iron Man, and Thor to fight against the Sentry. A brutal battle was waged, eventually ending with the Sentry's death.
Osborn, meanwhile, went insane after loosing control over the Sentry - ripping off his armor to reveal his face painted as his old identity of the Green Goblin. This was recorded and seen on TV - utterly vindicating both Asgard and the real Avengers.
Asgard, though, was destroyed. The entire castle-city was ruined.. The once Shining City of the gods had been laid low.
Joining together after so long, Thor, Captain America, and Iron Man where able to mend old wounds - and work towards rebuilding Asgard. Thor's exile from Asgard, what was left of it anyway, was lifted by Balder. There was a 5 issue mini-series, drawn by Alan Davis, showing how the three men were able to put aside their previous grievances and move on. I've only read the first issue of this, but not the rest of the series -- so I don't know what it was all about, except that the Enchantress appeared in it. After this, though - Thor once again stood alongside his fellow Avengers, and returned to serve on the team.
..... But, there's something else hidden underneath what occurred - that would become pertinent to Thor very soon. Loki had died - yet the Trickster was merely completing his grandest scheme yet. You see, all the wickedness and evil he engaged in, to undermine Thor and Balder - and his dealing with Doctor Doom, left Loki with a very real truth: Loki is still Loki. All the Asgardians where reborn - yet none of them where any different than how they where before. Thor was still heroic, Balder was still brave... and Loki was still Loki.
This dissatisfaction with his eternal role in life lead Loki to commit to the greatest trick of all: to die, and be reborn -- as something else. He had come to realize he had to change - and this was part of that plan. Before the fall of Asgard, Loki had been able to make a deal with Hela, Goddess of Death, to strike Loki's name from the book of the dead. Now when Loki dies - he will not be sent to Hel. It was the biggest gamble Loki ever made -- there was no guarantee he would actually come back to life. (You can read more about what happens to Loki here: Journey into Mystery.)
Next Up: Matt Faction's current run on Thor!