That's pretty much it. Not only did the first anime diverge from the manga after around episode 25 or so, the later events totally contradict the manga in fundamental ways (the story behind the homunculi, for instance, is VERY different) that they couldn't just add on another season. It had to be remade from the beginning.
I do really recommend you guys pick up the manga, though, if you haven't. I loved the first series, own it on DVD, watched it all the way through. But I was reading the manga and re-watching the first series at the same time, and when the manga started to go in a different direction from the first anime, I dropped watching the first anime altogether. It just paled in comparison.