Originally Posted by pseudonym
That's not what I heard, lol.
I heard Downey didn't want him as director.
If you've seen Iron Man 2 then you noticed that it wasn't quite the movie we'd all hoped for. Actually it wasn't very good. Part of the problem was the movie seemed wrapped around an odd, Avengers-focused, subplot which never really fit into the story. Jon Favreau may not have liked it any more than you or I do.
Our source says Iron Man 2 wasn't the movie Jon Favreau wanted to make. Marvel interfered heavily with his work on the movie and turned the project into an infomercial for The Avengers. Favreau felt the movie was rushed into production (and if you followed the development process you know it was) and they pushed him into making it without a fully realized script. Iron Man 2 wasn't the movie he wanted to make and because of that, if there's an Iron Man 3, there's every reason to think he won't be back. Marvel doesn't want to pay him and Favreau may not want to deal with more Marvel interference.
Favreau wasn't the only one unhappy with Iron Man 2. Robert Downey Jr. saw those same problems and according to our source, "While he's locked for Iron Man 3, chances are, that will be his last movie." In the meantime, Downey will get (and probably deserves) top billing in The Avengers.