Wal-Mart IS one of the largest retailers of video games. If Wal-Mart doesn't carry your game, chances are you as a publisher or developer are going to miss out on a large number of sales. That's just plain fact.
Wal-Mart also considers itself a family store. They have in the past considered not selling M-rated games, even, but they changed their minds. An AO rating has the same stigma attached to it as an X or NC-17 rating does on a movie. It is considered inappropriate for children, and thus inappropriate for families. While there is likely conservatism at the heart of Wal-Mart's business practices, they are still a business, and if they felt that they would increase sales, I'm sure they'd carry AO rated games. But the real "problem" they face is their customers -- families -- might elect to stop shopping at Wal-Mart if Wal-Mart sold things that were inappropriate for families. Right now, the upper level for acceptability is R-rated movies and M-rated games. I seriously doubt that'll change.
And other retailers face similar barriers. Toys-R-Us is a TOY STORE, for example.
Given that the largest retailers simply will not stock or sell AO rated games, no publisher in their right minds will spend millions of dollars on an AO rated game. They're simply not going to make enough sales to cover the cost of development, marketing and distribution.