I started playing the game (on and off) in the early 00s so I do have a (partial) understanding of how the game waxed and waned over the years. It's worth remembering that giant alliances stitching up whole continents in peace, and similar problems, still occurred in the "good old days" but it's equally worth remembering that they were solved by pro-active intervention from the titans (e.g. Tom lightning bolting the rulers of the United Sirion States) and from other players to keep the game fun.
However, overall, it was still the case that the game was probably a lot more active back then and it's a fact that the game's mechanics were fundamentally designed for higher overall noble densities.
The fact that even the golden ages of realms like D'Hara still involved long periods of quiet is more a reflection of geography than noble densities. Because of Dwilight's size and how it developed - a wave of colonisation which pushed realms to move far away from other realms so that they'd have room to expand, followed by a decline in the player base leaving realms overstretched, followed by the closure of the west killing off a lot of realms completely, followed by realms being left isolated - it's not really a good example of how high noble densities can work.
Much better examples are Atamara, East Continent and FEI which, despite eventual declines, were pretty much always in turmoil when player numbers were higher (the exceptional periods of pro-longed peace were, as I said, more a consequence of federations and individual rulers combined with a lack of titanic intervention than they were of anything else).
So that's why I really do think that higher noble densities, combined with realms being packed together, is the key to improving the quality of game play.
