I thought a bit if i should post or not. But have my two cents.
From my view, the most illa staff people lacked to see two things :
1. Not many people except roleplayers will play a game that does not support some shiny stuff like pets, mounts, what-does-my-char-wear.
As a result, they will come in, check the game out, and leave immediately or after a few days. Or even leave as soon as they see some screenshots and find out "ohno its 2D" before even playing.
2. People who like roleplaying have a higher chance not to care as much for the shiny things, funny colours and furry companions. They might even come to like some people who think alike and stay, perhaps even for a few years.
Because of that, focus changed from roleplay to "we need more players of every possible type."
Focussing on bringing more "average" gamers into the game and putting less and less enforcement on roleplay, Account-tech-wise and rule-wise, does scare some roleplayers away. More in the long run. A few people learn to RP, but the fewest learn the fact that a good RPed character can have a totally different motivation than the player behind it.
Add the problem that by now, there are many Free-to-play- and RP-free 3D online worlds around. Some like Flyff even with a nice and usually friendly atmosphere. Illarion, not being developed by people who are paid for doing that and nothing else, has no chance to compete against such commercial but free projects. Players not interested in RP WILL most likely favour other games just because Illa is not 3D.
Result :
Illarion population changes in the long run from few long time players to many short-time-players. Overall, online player numbers don't increase much.
The influence on the game's atmosphere :
Most players don't know any background Info at all, most don't care anyway. The few who do a bit read a few parts and then change whatever they don't like or add whatever they like because the existing texts are hard to find and are not even directly listed on an easy-to-access-place.
Effect : The game atmosphere is best described as loose, locationally bound and outside of closed societies it's kinda chaotic and roleplay niveau has become more childish (many seem to think that "character depth" is defined by "i-make-him-evil-so-hes-kinda-cool-and-yeah-he'll-pray-to-moshran" so more than 70% of all characters are created to be "evil").
That's also one reason why even evil cultists seem dull and "grey" - because everyone is one, and none of them has the skill nor the resolve to play a cultist nor the whole cult like they would have to be played.
(--> In some city and creeds descriptions (perhaps one or two players have read them, most might not even be translated into english and you have to really dig in the Illapedia just to find them) it may be mentioned that cultists are executed kinda everywhere on the continent, that is if they don't kill each other before, may it be out of internal power struggles or because they couldn't get another human sacrifice in-time.
Short recap :
Moshran: Only strength counts, slay weaker ones until you're the last one standing, lets make some war, RAAAR.
Cherass : Boo, make some undead things kill some living so we have more bodies for making undead !
Cheerga : Oh, you are a pretty boy, lets make you kill your parents and then do something to you that you'll never forget and that noone usually survives. *guts*
Drargorog : Wheee we have some demon summoning stuff here, lets release them and slay everyone so only the strong ones survive.
)
All of that together makes illarion a place that can have some good and even nifty atmosphere in some locations where groups of people sit together and roleplay, but not in or around troll's bane, which does more look like a sandbox with axes, knifes, daggers and bloody sand. And some bunch of nerds who have "oh god i am evil" or "dirty deeds done dirt-cheap" written in red on black t-shirts.
Speaking of that, i think that most players like to play wannabe-villains because they think that it's easy to do so. Playing a selfish, greedy or powerhungry char is a very easily defined character motivation: You don't have to think much about a character background when all he will do when people ask about his past is insult them or kick their balls. It's harder to think about the motivation, views, insight and character details of a more good natured character.
Plainly spoken, too many players prefer to play easily (and badly)-played wannabe-villain chars with cybersex attitude because they are either too lazy to think or because they just lack style.