Here's what I think happened, just IMO of course.
Ryzom already is very unconventional. The appearance and lore of the game is unique, it was - and is - always going to be more of a niche game. There are things that were apparently there - or tested - in beta that aren't in the main game and I don't understand why particularly, sittable furniture and so on, but as with many MMOs Ryzom suffered from being shoved out the door too early and as with those other earlybird games pretty much everything done since then has been reaction and putting out fires.
Problem 1
Ryzom came out, was pushed out the door, at the same time as WoW and EQ2. While it was predictable that this would have smushed Ryzom's uptake (especially with an early-released product) I don't think anyone appreciated quite what a phenomenon WoW would turn out to be. In the long term it may be a good thing, training wheels for new MMO players, some of whom will come to Ryzom. Nevertheless it didn't help that Ryzom was a tad buggy and unpolished when pushed out the door.
Problem 2
Patch one, intended to be a fix for a lot of the niggling problems and gameplay issues with combat was horribly, horribly misjudged and wiped out a huge amount of the playerbase. This compounded the reactive nature of all the changes made since but even though they fixed it within a couple of weeks it was too late and set the stage for later problems.
Problem 3
The server merge. Again, short term thinking. It certainly saved money in the short term and created a more populous and appealing server for new players it has built a ton of long term problems into the English server. The US and European gaming cultures ARE broadly different, the timezone issue and cultural biases in faction selection have caused problems and now everyone's too entangled with each other to seperate again. Another example of reactive, short-term emergency thinking.
Problem 4
Episode 2 - Another misjudging of the playerbase and the needs of the game. While executed MUCH better the sudden and brutal introduction of wholesale PvP was like unleashing Godzilla on the Smurf village. Unexpected and devastating. Where patch 1 killed off a large quantity of players, Episode 2 killed off a lot of quality players. The very cooperative, friendly and RP/Community oriented culture that had sprung up, self sustaining, maintaining and probably keeping Ryzom alive was torn apart by the only new 'content' for ages. The supposed maturity of the community shattered as selfish PvPers emerged to exploit the new mechanics and went crazy, there was no role for neutrals, the Kami were presented as hypocrits, Tryton looked weak and ineffective and there was no truly peaceful way to participate.
Problem 5
The outposts. Again this appears to have been short term and reactive thinking, changing outposts from the vision presented to replace them with a faction war by proxy, only involving PvP and carrying on from Episode 2. Instead of what they could have been the OPs were replaced with rather conventional resource battlegrounds, the similarities with AOs 'Notum Wars' and Jessica's role in both have been noted before. Turning this into a faction war item has also thrown the imbalance between the factions into sharp relief, it is not entirely numerical as part of the problem lies in cultural distinctions between those who choose to play Kami and those who choose to play Karavan (and those who play neutral) but there is an undeniable imbalance.
Problem(?) 6
Ruins of Silan. Actually, this isn't a problem per se, but it has problems. If anyone listened to that recent podcast you can tell that even an experienced game reviewer, who has talked with people in universe and talked to guilds has come away with several, key, false impressions of the mainland. IMO Silan also furthers the shift in playerbase culture already started by Episode 2 and Ouposts.
Problem(?) 7
Ryzom Ring represents (finally) a return to less conventional content and some of the vision that made Ryzom so appealing to its original, sidelined playerbase. Hopefully it'll bring a lot of them back since it provides a way to play without involving oneself in the faction war and PvP and of being creative. While I understand the idea of releasing a simple version and expanding later the previous rate of game expansion tends to make one wary of putting much faith in the R2 system being expanded and completed too early. There are also problems that have been noted by others in that providing a toolset and then restricting people's creativity with that rules set is like giving them a broken pencil. Things like not being able to make animals 'speak' or not being able to fight the Kami or Karavan in scenarios seem minor things but every time someone tries to use the tools and runs into something that they can't do the percieved value drops considerably. Especially when these things seem to be down to arbitrary decisions rather than mechanics. One answer might be the difference between 'strict' and 'loose' scenarios that was previously mentioned.
Future Problems
The Kitin nest and the spires represent conventional content again. The kitin nest is a dungeon and raid scenario, however it is dressed up. This is another 'conventional' game addition and appears to consist of 'phat lewt' which could undermine the crafter economy in the same way the shield problem and Aen armour have - though the bandit bosses appear to be all but abandoned as an idea.
The spires represent a sort of Realm Vs Realm combat overlay but also restrict player movement and freedom as presented. This is another conventional addition (RvR) and further drives the playerbase in a direction counter to that which existed initially.
It will be, perhaps, most interesting to see what's announced next and whether it shows a return to original values (like R2) or a continuance of the populist philosophy.
Analysis
Most of the last two years has been reactive on Ryzom's part down to a not-so-good and poorly timed launch. Much of the initial time appears to have been spent making the basic game actually work properly live and since then most of the additions and changes have been attempts to grab back players by pursuing the populist WoW playing crowd with standardised game additions, PvP, outposts etc. Of these measures only Silan has really met with acclaim and has had the positive and desired effect, it is too early to tell what impact R2 has had or is having and both things still have reservations about them. It may be that success with Silan and R2 will allow Nevrax to go back more to the original vision once again but then that may not be wise if the playerbase has shifted that much towards mainstream players.
Opinion
While the shift to populism may have been essential for the financial survival of Ryzom I cannot help but feel that it has all been short-mid term reactive thinking rather than being good decisions for the long term survival of the game. It seems to me, evidenced by the number of ex SWG players that turn up here, that Ryzom's main appeal is still towards the niche of the RPer/Community oriented players who appreciate Ryzom's quirkiness of lore and more open ended nature. IMO the game would be better served working on story elements and episodes, invasions and adding RP/Community content to appeal to and enable that demographic - which tends to be much more long-term loyal to a game than the main, WoW playing demographic. I believe the playerbase would get far more out of meaningful big events, RP props, housing, different mounts, clothing/armour and yes, even dancing/entertainment than it will from raids and other conventional content.
IMO Ryzom can't compete with 'the big boys' if it tries to take the populist route, there simply isn't the manpower or financing. It can compete by being more creative, innovative and quirky and supporting the player demographic that was more prevalent before Ep2.
Ryzom, despite some of its lacks, is hands down the best MMO for roleplaying in existence right now and also has far and away the best community, despite the slow shift. If I were in charge I'd play to Ryzom's strengths and I _hope_ that R2 represents a move back in that direction.
Oops, long post, but I love analysing this stuff
(And to think I'm considered a 'whiner' here and a 'fanboi' on MMORPG.com)