As a ltd company it's reasonable to suggest that they will be expected to operate to a higher standard compared to a local club were you pay a couple of quid.
I'm sure if people are keen and KTG remain unwilling to compromise then there is a host of reasons why going to court may prove costly for them. As quick google comes up with http://en.m.wikipedia.org/wiki/Unfair_Terms_in_Consumer_Contracts_Regulations_1999#section_2
If you've bought 5 tickets for mates etc thats 150 quid and becomes worth pursuing... If you paid by credit card then that may help... It's a slippery slope and KTG are currently on very dangerous ground.
Reputation. Lifetime to build, takes a moment to destroy.
What would their reputation be if they ran the event and people died? I for one respect their courage in calling the event off.
I assume they could have just posted a note up telling riders the conditions were treacherous and all riders must sign a disclaimer accepting all risk. Then individuals could choose risk their lives for a few quid or not bother, therefore giving up all their rights to free entry in future events.