i think the lack of end game is killing it. there's just not much to do. there's not really any good pve spots because air elementals are the easiest/quickest thing to farm for the majority of the pop. there's ocb which is fun for some people but not everyone is into that. the remaining blue vs red pvp is interrupted by paladins.
people still farm things other than airs but for the casual player thats the place to be. people still pk and paladins aren't the worst thing to ever happen but they do insure that most reds are just going to log out when they start showing up and the paladins actually belong to most reds to begin with. so people farm out their gold for their houses or whatever, get all stocked up and go out to find there's really not a lot left to do.
i'd start by adding in something like champ spawns, re-arranging dungeon gates (especially the one by air eles), and doing a tweak to the paladin system (temporary stat would be better imo). champ spawns could drop a load of skill scrolls or something and have a chance at those new super slayers or whatever. people just need reasons to really pve, which will lead to more pking, which leads to more pvp and more activity for everyone.