So then we agree, on a basic level, that it is possible the barrier to entry might not change at all and possibly even that limiting the amount of towns in an alliance would not necessitate there being less players in an alliance?You aren't technically, you can have as many players in a town as you want.
These are points that can be resolved through things already in progress (better-er), such as Sharding.The server cannot handle the high numbers and it lags terribly, then players never come back. I think this would assist in stopping that. I don't think there is enough to do on the server as a whole and creating more fights and making materials necessary for fights more obtainable would alleviate that to a certain extent.