It was sad because the cast and crew after season 6 expected another season to follow but it never happened. CBS was trying to turn away from rural comedies and '60s humor to more sophisticated shows (All in the Family, Mary Tyler Moore, etc). Werner Klemperer said in an interview in the late 70s that there was a sense of sadness that Hogan's Heroes never had a proper ending with the prisoners ultimately released by the Allies etc
Mr. Dixon left simply because there was very little for him to do on the show. He was replaced but it was never explained on the show where he went other than a new prisoner taking his place