About this, in all of the realms I've played in it seems like <10% of the players participate amongst themselves while everyone else is locked out or too apathetic to join in. I doubt things could get any worse than the current situation.
I'd place the blame mainly on realm size and the inability of knights and Lords to meaningfully participate in gameplay. Currently only council members and Dukes have any real power, and council members are severely limited due to entire Islands being consolidated by half a dozen super realms. Furthermore it's hard to feel any sort of connection to these uber realms because they're so big. The difference between a large realm and a small realm in this way is like the difference between a Walmart and a small, local business.
I think the proposal in the opening post is a good idea if only to break up these mega realms into smaller realms, as that would make more council positions available and allow for more individual participation.
The problem with small realms is that, often, barely anyone cares to run for any form of office. Often, if you scrap those with you clearly can't trust with the positions, you have no candidates at all.
You end up with everyone having titles, but the titles being meaningless and the title-holders doing no more than the average knight of a large realm would 'cause the only one who put his name in during elections couldn't be arsed to actually do his job.
You also end up having much less of the active people who stimulate action and discussion, reducing the activity of those who would be willing to react without wishing to initiate anything themselves.
